Company Announcements

Public Storage Reports Results for the Three and Six Months Ended June 30, 2021

GLENDALE, Calif.--(BUSINESS WIRE)--Aug. 3, 2021-- Public Storage (NYSE:PSA) announced today operating results for the three and six months ended June 30, 2021.

Highlights for the Three Months Ended June 30, 2021

  • Reported net income allocable to common shareholders of $1.97 per diluted share.
  • Reported core FFO allocable to common shareholders (“Core FFO”) of $3.15 per diluted share, an increase of 28.0% relative to the same period in 2020.
  • Increased Same Store (as defined below) direct net operating income by 20.8%, resulting from a 10.8% increase in Same Store revenues and a 15.9% decrease in Same Store direct cost of operations.
  • Achieved 79.4% Same Store direct net operating income margin, an increase of 4.9% relative to the year ended December 31, 2020.
  • Acquired 84 self-storage facilities with 7.0 million net rentable square feet for $2.3 billion. This acquisition activity was funded by the largest bond issuance in company history totaling $2.0 billion at a weighted average annual rate of 1.6%. Subsequent to June 30, 2021, we acquired or were under contract to acquire 36 self-storage facilities across 15 states with 3.0 million net rentable square feet, for $466.6 million.
  • Opened two newly developed facilities and various expansion projects with 0.3 million net rentable square feet costing $40.2 million. At June 30, 2021, we had various facilities in development and expansion with 4.3 million net rentable square feet estimated to cost $661.0 million.
  • Refinanced $525.0 million of 5.02% weighted average preferred equity with $604 million of 4.00% preferred equity, continuing to lower our in place cost of capital.

Operating Results for the Three Months Ended June 30, 2021

For the three months ended June 30, 2021, net income allocable to our common shareholders was $346.2 million or $1.97 per diluted common share, compared to $246.1 million or $1.41 per diluted common share in 2020 representing an increase of $100.1 million or $0.56 per diluted common share. The increase is due primarily to (i) a $126.8 million increase in self-storage net operating income (described below), (ii) a $11.4 million increase due to equity in earnings of unconsolidated real estate entities, partially offset by (iii) a $35.1 million increase in depreciation and amortization expense and (iv) a $10.6 million increase in general and administrative expense due primarily to increased share-based compensation expense.

The $126.8 million increase in self-storage net operating income is a result of a $91.6 million increase in our Same Store Facilities, and a $35.2 million increase in our Non-Same Store Facilities (as defined below). Revenues for the Same Store Facilities increased 10.8% or $66.4 million in the three months ended June 30, 2021 as compared to 2020, due primarily to higher realized annual rent per available square foot and weighted average square foot occupancy. Cost of operations for the Same Store Facilities decreased by 13.1% or $25.2 million in the three months ended June 30, 2021 as compared to 2020, due primarily to a 33.7% ($13.1 million) decrease in on-site property manager payroll resulting from a temporary $3.00 hourly incentive increase and enhancement of paid time off benefits to all of our property managers between April 1, 2020 and June 30, 2020 during the COVID-19 Pandemic (the "COVID Pandemic”), a 61.2% ($10.8 million) decrease in marketing expenses, and a change in property tax timing contributing to our 7.3% ($5.3 million) decrease in property tax expense. The increase in net operating income of $35.2 million for the Non-Same Store Facilities is due primarily to the impact of facilities acquired in 2020 and 2021 and the fill-up of recently developed and expanded facilities.

Operating Results for the Six Months Ended June 30, 2021

For the six months ended June 30, 2021, net income allocable to our common shareholders was $732.1 million or $4.18 per diluted common share, compared to $559.3 million or $3.20 per diluted common share in 2020 representing an increase of $172.8 million or $0.98 per diluted common share. The increase is due primarily to (i) a $167.9 million increase in self-storage net operating income (described below), (ii) a $43.0 million increase due to the impact of foreign currency exchange gains and losses associated with our Euro denominated debt, partially offset by (iii) a $46.1 million increase in depreciation and amortization expense and (iv) a $12.3 million increase in general and administrative expense due primarily to increased share-based compensation expense.

The $167.9 million increase in self-storage net operating income is a result of a $120.9 million increase in our Same Store Facilities (as defined below), and a $47.0 million increase in our Non-Same Store Facilities (as defined below). Revenues for the Same Store Facilities increased 7.1% or $87.5 million in the six months ended June 30, 2021 as compared to 2020, due primarily to higher realized annual rent per available square foot and weighted average square foot occupancy. Cost of operations for the Same Store Facilities decreased by 8.7% or $33.3 million in the six months ended June 30, 2021 as compared to 2020, due primarily to a 24.3% ($17.4 million) decrease in on-site property manager payroll resulting from a temporary $3.00 hourly incentive increase and enhancement of paid time off benefits to all of our property managers between April 1, 2020 and June 30, 2020 during the COVID Pandemic, a change in property tax timing contributing to a 7.9% ($11.5 million) decrease in property tax expense, and a 34.0% ($11.0 million) decrease in marketing expenses. The increase in net operating income of $47.0 million for the Non-Same Store Facilities is due primarily to the impact of facilities acquired in 2020 and 2021 and the fill-up of recently developed and expanded facilities.

Funds from Operations

For the three months ended June 30, 2021, funds from operations (“FFO”) was $2.99 per diluted common share, as compared to $2.28 in the same period in 2020, representing an increase of 31.1%. FFO is a non-GAAP measure defined by the National Association of Real Estate Investment Trusts and generally represents net income before depreciation and amortization expense, gains and losses and impairment charges with respect to real estate assets. A reconciliation of GAAP diluted net income per share to FFO per share, and additional descriptive information regarding this non-GAAP measure, is attached.

For the six months ended June 30, 2021, FFO was $6.07 per diluted common share, as compared to $4.90 in the same period in 2020, representing an increase of 23.9%.

We also present “Core FFO per share,” a non-GAAP measure that represents FFO per share excluding the impact of (i) foreign currency exchange gains and losses, (ii) charges related to the redemption of preferred securities, and (iii) certain other non-cash and/or nonrecurring income or expense items primarily representing, with respect to the periods presented below, the impact of casualties, and due diligence costs incurred in strategic transactions. We review Core FFO per share to evaluate our ongoing operating performance, and we believe it is used by investors and REIT analysts in a similar manner. However, Core FFO per share is not a substitute for net income per share. Because other REITs may not compute Core FFO per share in the same manner as we do, may not use the same terminology, or may not present such a measure, Core FFO per share may not be comparable among REITs.

The following table reconciles from FFO per share to Core FFO per share (unaudited):

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2021

 

2020

 

Percentage Change

 

2021

 

2020

 

Percentage Change

 

 

 

 

 

 

 

 

 

 

 

 

FFO per share

$

2.99

 

 

$

2.28

 

 

31.1

%

 

$

6.07

 

 

$

4.90

 

 

23.9

%

Eliminate the per share impact of items excluded from Core FFO, including our equity share from investments:

 

 

 

 

 

 

 

 

 

 

 

Foreign currency exchange loss (gain)

0.07

 

 

0.11

 

 

 

 

(0.19)

 

 

0.06

 

 

 

Preferred share redemption charge

0.10

 

 

0.09

 

 

 

 

0.10

 

 

0.09

 

 

 

Other items

(0.01)

 

 

(0.02)

 

 

 

 

(0.01)

 

 

(0.01)

 

 

 

Core FFO per share

$

3.15

 

 

$

2.46

 

 

28.0

%

 

$

5.97

 

 

$

5.04

 

 

18.5

%

Property Operations – Same Store Facilities

The Same Store Facilities consist of facilities that have been owned and operated on a stabilized level of occupancy, revenues, and cost of operations since January 1, 2019. The composition of our Same Store Facilities allows us to more effectively evaluate the ongoing performance of our self-storage portfolio in 2019, 2020, and 2021 and exclude the impact of fill-up of unstabilized facilities, which can significantly affect operating trends. We believe the Same Store information is used by investors and analysts in a similar manner. However, because other REITs may not compute Same Store Facilities in the same manner as we do, may not use the same terminology, or may not present such a measure, Same Store Facilities may not be comparable among REITs. The following table summarizes the historical operating results of these 2,278 facilities (148.9 million net rentable square feet) that represent approximately 81% of the aggregate net rentable square feet of our U.S. consolidated self-storage portfolio at June 30, 2021 (unaudited):

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2021

 

2020

 

Percentage Change

 

2021

 

2020

 

Percentage Change

 

(Dollar amounts in thousands, except for per square foot data)

Revenues (a):

 

 

 

 

 

 

 

 

 

 

 

Rental income

$

661,684

 

 

$

596,110

 

 

11.0

%

 

$

1,289,495

 

 

$

1,196,169

 

 

7.8

%

Late charges and administrative fees

19,154

 

 

18,308

 

 

4.6

%

 

39,160

 

 

44,940

 

 

(12.9)

%

Total revenues

680,838

 

 

614,418

 

 

10.8

%

 

1,328,655

 

 

1,241,109

 

 

7.1

%

 

 

 

 

 

 

 

 

 

 

 

 

Direct cost of operations (a):

 

 

 

 

 

 

 

 

 

 

 

Property taxes (b)

67,194

 

 

72,458

 

 

(7.3)

%

 

133,749

 

 

145,236

 

 

(7.9)

%

On-site property manager payroll

25,641

 

 

38,698

 

 

(33.7)

%

 

54,370

 

 

71,804

 

 

(24.3)

%

Repairs and maintenance

12,124

 

 

11,517

 

 

5.3

%

 

23,145

 

 

22,252

 

 

4.0

%

Snow removal

953

 

 

153

 

 

522.9

%

 

2,963

 

 

2,131

 

 

39.0

%

Utilities

9,334

 

 

9,567

 

 

(2.4)

%

 

20,079

 

 

20,416

 

 

(1.7)

%

Marketing

6,844

 

 

17,630

 

 

(61.2)

%

 

21,415

 

 

32,438

 

 

(34.0)

%

Other direct property costs

18,289

 

 

16,953

 

 

7.9

%

 

36,630

 

 

33,842

 

 

8.2

%

Total direct cost of operations

140,379

 

 

166,976

 

 

(15.9)

%

 

292,351

 

 

328,119

 

 

(10.9)

%

Direct net operating income (c)

540,459

 

 

447,442

 

 

20.8

%

 

1,036,304

 

 

912,990

 

 

13.5

%

Indirect cost of operations (a):

 

 

 

 

 

 

 

 

 

 

 

Supervisory payroll

(9,184)

 

 

(10,927)

 

 

(16.0)

%

 

(19,018)

 

 

(21,838)

 

 

(12.9)

%

Centralized management costs

(13,066)

 

 

(11,180)

 

 

16.9

%

 

(26,083)

 

 

(24,992)

 

 

4.4

%

Share-based compensation (d)

(4,545)

 

 

(3,262)

 

 

39.3

%

 

(10,734)

 

 

(6,585)

 

 

63.0

%

Net operating income (e)

$

513,664

 

 

$

422,073

 

 

21.7

%

 

$

980,469

 

 

$

859,575

 

 

14.1

%

 

 

 

 

 

 

 

 

 

 

 

 

Gross margin (before indirect costs, depreciation, and amortization expense)

79.4

%

 

72.8

%

 

9.1

%

 

78.0

%

 

73.6

%

 

6.0

%

 

 

 

 

 

 

 

 

 

 

 

 

Gross margin (before depreciation and amortization expense)

75.4

%

 

68.7

%

 

9.8

%

 

73.8

%

 

69.3

%

 

6.5

%

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average for the period:

 

 

 

 

 

 

 

 

 

 

 

Square foot occupancy

97.0

%

 

94.2

%

 

3.0

%

 

96.3

%

 

93.6

%

 

2.9

%

Realized annual rental income per (f):

 

 

 

 

 

 

 

 

 

 

 

Occupied square foot

$

18.32

 

 

$

17.00

 

 

7.8

%

 

$

17.98

 

 

$

17.16

 

 

4.8

%

Available square foot (“REVPAF”)

$

17.77

 

 

$

16.01

 

 

11.0

%

 

$

17.32

 

 

$

16.07

 

 

7.8

%

At June 30:

 

 

 

 

 

 

 

 

 

 

 

Square foot occupancy

 

 

 

 

 

 

96.5

%

 

94.6

%

 

2.0

%

Annual contract rent per occupied square foot (g)

 

 

 

 

 

 

$

18.75

 

 

$

17.24

 

 

8.8

%

(a)

 

Revenues and cost of operations do not include tenant reinsurance and merchandise sales and expenses generated at the facilities.

(b)

 

Property tax expense for 2021 will be expensed ratably through the year, as described in more detail in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our June 30, 2021 Form 10-Q. We expect decreases through the third quarter to be offset by an increase in the fourth quarter of 2021, resulting in an approximate increase of 5.0% for the year ended December 31, 2021, compared to the same period in 2020.

(c)

 

Direct net operating income (“Direct NOI”), a subtotal within NOI, is a non-GAAP financial measure that excludes the impact of supervisory payroll, centralized management costs, and share-based compensation in addition to depreciation and amortization expense. We utilize direct net operating income in evaluating property performance and in evaluating property operating trends as compared to our competitors.

(d)

 

For the three and six months ended June 30, 2021, share-based compensation expense increased 39.3% and 63.0%, respectively, as compared to the same periods in 2020, primarily due to the absence of comparable performance-based share-based compensation expense for the three and six months ended June 30, 2020 and the accelerated compensation costs recognized in the three and six months ended June 30, 2021 associated with modifying our share-based compensation plans in July 2020, to allow immediate vesting upon retirement.

(e)

 

See attached reconciliation of self-storage NOI to net income.

(f)

 

Realized annual rent per occupied square foot is computed by dividing annualized rental income, before late charges and administrative fees, by the weighted average occupied square feet for the period. Realized annual rent per available square foot (“REVPAF”) is computed by dividing annualized rental income, before late charges and administrative fees, by the total available rentable square feet for the period. These measures exclude late charges and administrative fees in order to provide a better measure of our ongoing level of revenue. Late charges are dependent upon the level of delinquency, and administrative fees are dependent upon the level of move-ins. In addition, the rates charged for late charges and administrative fees can vary independently from rental rates. These measures take into consideration promotional discounts, which reduce rental income.

(g)

 

Annual contract rent represents the agreed upon monthly rate that is paid by our tenants in place at the time of measurement. Contract rates are initially set in the lease agreement upon move-in, and we adjust them from time to time with notice. Contract rent excludes other fees that are charged on a per-item basis, such as late charges and administrative fees, does not reflect the impact of promotional discounts, and does not reflect the impact of rents that are written off as uncollectible.

The following table summarizes selected quarterly financial data with respect to the Same Store Facilities (unaudited):

 

For the Quarter Ended

 

 

 

March 31

 

June 30

 

September 30

 

December 31

 

Entire Year

 

(Amounts in thousands, except for per square foot data)

Total revenues:

 

 

 

 

 

 

 

 

 

2021

$

647,817

 

$

680,838

 

 

 

 

 

 

2020

$

626,691

 

$

614,418

 

$

629,169

 

$

638,149

 

$

2,508,427

 

 

 

 

 

 

 

 

 

 

Total cost of operations:

 

 

 

 

 

 

 

 

 

2021

$

181,012

 

$

167,174

 

 

 

 

 

 

2020

$

189,189

 

$

192,345

 

$

184,329

 

$

146,584

 

$

712,447

 

 

 

 

 

 

 

 

 

 

Property taxes:

 

 

 

 

 

 

 

 

 

2021

$

66,555

 

$

67,194

 

 

 

 

 

 

2020

$

72,778

 

$

72,458

 

$

71,616

 

$

41,197

 

$

258,049

 

 

 

 

 

 

 

 

 

 

Repairs and maintenance, including

 

 

 

 

 

 

 

 

 

snow removal expenses:

 

 

 

 

 

 

 

 

 

2021

$

13,031

 

$

13,077

 

 

 

 

 

 

2020

$

12,713

 

$

11,670

 

$

12,973

 

$

13,485

 

$

50,841

 

 

 

 

 

 

 

 

 

 

Marketing:

 

 

 

 

 

 

 

 

 

2021

$

14,571

 

$

6,844

 

 

 

 

 

 

2020

$

14,808

 

$

17,630

 

$

16,158

 

$

13,526

 

$

62,122

 

 

 

 

 

 

 

 

 

 

REVPAF:

 

 

 

 

 

 

 

 

 

2021

$

16.86

 

$

17.77

 

 

 

 

 

 

2020

$

16.12

 

$

16.01

 

$

16.39

 

$

16.62

 

$

16.29

 

 

 

 

 

 

 

 

 

 

Weighted average realized annual

 

 

 

 

 

 

 

 

 

rent per occupied square foot:

 

 

 

 

 

 

 

 

 

2021

$

17.63

 

$

18.32

 

 

 

 

 

 

2020

$

17.33

 

$

17.00

 

$

17.16

 

$

17.46

 

$

17.24

 

 

 

 

 

 

 

 

 

 

Weighted average occupancy levels

 

 

 

 

 

 

 

 

 

for the period:

 

 

 

 

 

 

 

 

 

2021

95.6%

 

97.0%

 

 

 

 

 

 

2020

93.0%

 

94.2%

 

95.5%

 

95.2%

 

94.5%

Property Operations – Non-Same Store Facilities

In addition to the 2,278 Same Store Facilities, we have 371 facilities that were not stabilized with respect to occupancies, revenues, or cost of operations since January 1, 2019 or that we did not own as of January 1, 2019, including 205 facilities that were acquired, 67 newly developed facilities, 71 facilities that have been expanded or are targeted for expansion, and 28 facilities that are unstabilized due to the impact of casualties and other factors (collectively, the “Non-Same Store Facilities”). Operating data, metrics, and further commentary with respect to these facilities, including detail by vintage, are included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under “Self-Storage Operations” in our June 30, 2021 Form 10-Q.

Investing and Capital Activities

During the three months ended June 30, 2021, we acquired 84 self-storage facilities (39 in Maryland, 11 in Virginia, six in Idaho, four in Indiana, three each in Florida, Nebraska, and Texas, two each in Arizona, California, Georgia and Washington, and one each in Colorado, Illinois, Kansas, North Carolina, Ohio, Pennsylvania and South Carolina,) with 7.0 million net rentable square feet for $2.3 billion. During the six months ended June 30, 2021, we acquired 99 self-storage facilities (39 in Maryland, 12 in Virginia, six in Idaho, five in Arizona, four each in California, Indiana and Nebraska, three each in Florida, North Carolina, South Carolina and Texas, two each in Washington, Louisiana, Ohio and Georgia, and one each in Colorado, Illinois, Kansas, Nevada and Pennsylvania) with 8.1 million net rentable square feet for $2.5 billion.

The preceding discussion of properties acquired, includes our acquisition of the ezStorage portfolio on April 28, 2021, consisting of 48 properties (4.1 million net rentable square feet) for an acquisition cost of $1.8 billion, which includes 47 self-storage facilities and a property that is under construction. For the quarter ended June 30, 2021, these facilities generated revenues of $14.8 million, NOI of $11.6 million (including Direct NOI of $12.0 million) and square footage occupancy at quarter end was 94.2%.

Subsequent to June 30, 2021, we acquired or were under contract to acquire 36 self-storage facilities across 15 states with 3.0 million net rentable square feet, for $466.6 million.

During the three months ended June 30, 2021, we opened two newly developed facilities and various expansion projects (0.3 million net rentable square feet with 0.2 million in Florida and 0.1 million in Colorado) costing $40.2 million. During the six months ended June 30, 2021, we opened three newly developed facilities and various expansion projects (0.5 million net rentable square feet - 0.2 million each in Virginia and Florida and 0.1 million in Colorado) costing $85.6 million. At June 30, 2021, we had various facilities in development (1.9 million net rentable square feet) estimated to cost $308 million and various expansion projects (2.4 million net rentable square feet) estimated to cost $353 million. Our aggregate 4.3 million net rentable square foot pipeline of development and expansion facilities includes 1.0 million each in California and Florida, 0.4 million Maryland, 0.3 million each in New Jersey and Washington, 0.2 million each in Michigan, Minnesota, New York, and Texas and 0.5 million in other states. The remaining $411 million of development costs for these projects is expected to be incurred primarily in the next 18 to 24 months.

On June 16, 2021, we issued our 4.000% Series P Preferred Shares for gross proceeds of $604 million.

On June 18, 2021, we called for redemption, and on July 20, 2021 we redeemed, our 4.950% Series D Preferred Shares for $325 million, plus accrued dividends.

On June 30, 2021, we redeemed our 5.125% Series C Preferred Shares for $200 million.

Distributions Declared

On July 28, 2021, our Board of Trustees declared a regular common quarterly dividend of $2.00 per common share. The Board also declared dividends with respect to our various series of preferred shares. All the dividends are payable on September 30, 2021 to shareholders of record as of September 15, 2021.

Outlook for the Twelve Months Ending December 31, 2021

The following table outlines the Company’s Core FFO per share estimate and certain underlying assumptions for the year ending December 31, 2021:

 

Guidance Ranges for 2021

 

Low

High

 

(Amounts in thousands, except per share data)

Same Store:

 

 

Revenue growth

7.00%

8.50%

Expense growth

0.00%

1.00%

Net operating income growth

9.40%

11.90%

 

 

 

Acquisitions

$3,100,000

Development openings

$215,000

Non-Same Store net operating income

$225,000

$240,000

Ancillary net operating income

$137,000

$141,000

General and administrative expense

$96,000

$99,000

Interest expense

$94,000

$96,000

Preferred dividends

$182,000

Capital expenditures

$250,000

$300,000

 

 

 

Core FFO per share

$11.90

$12.30

Forward-looking Core FFO per share measures exclude estimates for the impact of (i) foreign currency exchange gains and losses, (ii) charges related to the redemption of preferred securities, and (iii) certain other significant non-cash and/or nonrecurring income or expense items such as loss contingency accruals, casualties, transactional due diligence, and advisory costs. Public Storage is unable to provide a reconciliation of Core FFO per share guidance measures to corresponding U.S. GAAP measures on forward-looking basis without unreasonable effort due to the overall high variability of most of the foregoing items that have been excluded. The items that are being excluded are difficult to predict and a reconciliation could result in disclosure that would be imprecise or potentially misleading. Material changes to any one of these items could have a significant effect on our guidance and future U.S. GAAP results.

Second Quarter Conference Call

A conference call is scheduled for August 4, 2021 at 9:00 a.m. (PDT) to discuss the second quarter earnings results. The domestic dial-in number is (866) 406-5408, and the international dial-in number is (973) 582-2770 (conference ID number for either domestic or international is 2088572). A simultaneous audio webcast may be accessed by using the link at www.publicstorage.com under “About Us, Investor Relations, News and Events, Event Calendar.” A replay of the conference call may be accessed through August 18, 2021 by calling (800) 585-8367 (domestic), (404) 537-3406 (international) or by using the link at www.publicstorage.com under “About Us, Investor Relations, News and Events, Event Calendar.” All forms of replay utilize conference ID number 2088572.

About Public Storage

Public Storage, a member of the S&P 500 and FT Global 500, is a REIT that primarily acquires, develops, owns and operates self-storage facilities. At June 30, 2021, we had: (i) interests in 2,649 self-storage facilities located in 39 states with approximately 184 million net rentable square feet in the United States, (ii) an approximate 35% common equity interest in Shurgard Self-Storage SA (Euronext Brussels:SHUR) which owned 243 self-storage facilities located in seven Western European nations with approximately 13 million net rentable square feet operated under the “Shurgard” brand and (iii) an approximate 42% common equity interest in PS Business Parks, Inc. (NYSE:PSB) which owned and operated approximately 28 million rentable square feet of commercial space at June 30, 2021. Our headquarters are located in Glendale, California.

This press release, our Form 10-Q for the second quarter of 2021, and additional information about Public Storage are available on our website, www.publicstorage.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include statements relating to our 2021 outlook and all underlying assumptions, our expected acquisition, disposition, development and redevelopment activity, supply and demand for our self-storage facilities, information relating to operating trends in our markets, expectations regarding operating expenses, including property tax changes, our strategic priorities, expectations with respect to financing activities, rental rates, cap rates and yields, leasing expectations, our credit ratings, and all other statements other than statements of historical fact. Such statements are based on management’s beliefs and assumptions made based on information currently available to management. All statements in this press release, other than statements of historical fact, are forward-looking statements which may be identified by the use of the words “outlook,” “guidance,” “expects,” “believes,” “anticipates,” “should,” “estimates,” and similar expressions. These forward-looking statements involve known and unknown risks and uncertainties, which may cause our actual results and performance to be materially different from those expressed or implied in the forward-looking statements. Factors and risks that may impact future results and performance include, but are not limited to, those described in Part 1, Item 1A, “Risk Factors” in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on February 24, 2021 and in our other filings with the SEC including: general risks associated with the ownership and operation of real estate, including changes in demand, risk related to development, expansion and acquisition of self-storage facilities, potential liability for environmental contamination, natural disasters and adverse changes in laws and regulations governing property tax, real estate and zoning; risks associated with downturns in the national and local economies in the markets in which we operate, including risks related to current economic conditions and the economic health of our customers; risks associated with the COVID-19 Pandemic (the "COVID Pandemic”) or similar events, including but not limited to illness or death of our employees or customers, negative impacts to the economic environment and to self-storage customers which could reduce the demand for self-storage or reduce our ability to collect rent, and/or potential regulatory actions to (i) close our facilities if we were determined not to be an “essential business” or for other reasons, (ii) limit our ability to increase rent or otherwise limit the rent we can charge or (iii) limit our ability to collect rent or evict delinquent tenants; the risk that there could be an out-migration of population from certain high-cost major markets, if it is determined that the ability to “work from home,” which has become more prominent during the COVID Pandemic, could allow certain workers to live in less expensive localities, which could negatively impact the occupancies and revenues of our properties in such major high-cost markets; the risk that more jurisdictions will reinstitute COVID Pandemic restrictions, which were previously eased, in response to increases in infections, including as a result of variants such as the Delta variant, or if additional pandemics occur; the risk that we could experience a change in the move-out patterns of our long-term customers due to economic uncertainty and the increases in unemployment resulting from changes in the macro environment, which could lead to lower occupancies and rent “roll down” as long-term customers are replaced with new customers at lower rates; risk of negative impacts on the cost and availability of debt and equity capital as a result of the COVID Pandemic, which could have a material impact upon our capital and growth plans; the impact of competition from new and existing self-storage and commercial facilities and other storage alternatives; the risk that our existing self-storage facilities may be at a disadvantage in competing with newly developed facilities with more visual and customer appeal; risks related to increased reliance on Google and Sparefoot as customer acquisition channels; difficulties in our ability to successfully evaluate, finance, integrate into our existing operations and manage properties that we acquire directly or through the acquisition of entities that own and operate self-storage facilities or to consummate announced acquisitions in the expected timeframe or at all; risks associated with international operations including, but not limited to, unfavorable foreign currency rate fluctuations, changes in tax laws and local and global economic uncertainty that could adversely affect our earnings and cash flows; risks related to our participation in joint ventures; the impact of the legal and regulatory environment, as well as national, state and local laws and regulations including, without limitation, those governing environmental issues, taxes, our tenant reinsurance business, and labor, including risks related to the impact of new laws and regulations; risks of increased tax expense associated either with a possible failure by us to qualify as a REIT, or with challenges to the determination of taxable income for our taxable REIT subsidiaries; risks due to ballot initiatives or other actions that could remove the protections of Proposition 13 with respect to our real estate and result in substantial increases in our assessed values and property tax bills in California; changes in United States federal or state tax laws related to the taxation of REITs and other corporations; security breaches, including ransomware, or a failure of our networks, systems or technology could adversely impact our operations or our business, customer and employee relationships or result in fraudulent payments; risks associated with the self-insurance of certain business risks, including property and casualty insurance, employee health insurance and workers compensation liabilities; difficulties in raising capital at a reasonable cost; delays and cost overruns on our projects to develop new facilities or expand our existing facilities; difficulties in our ability to hire and retain skilled management and staff; ineffective succession planning for our CEO, executive management and our other key employees; ongoing litigation and other legal and regulatory actions which may divert management’s time and attention, require us to pay damages and expenses or restrict the operation of our business; and economic uncertainty due to the impact of war or terrorism. These forward-looking statements speak only as of the date of this press release. All of our forward-looking statements, including those in this press release, are qualified in their entirety by this statement. We expressly disclaim any obligation to update publicly or otherwise revise any forward-looking statements, whether because of new information, new estimates, or other factors, events or circumstances after the date of these forward-looking statements, except when expressly required by law. Given these risks and uncertainties, you should not rely on any forward-looking statements in this press release, or which management may make orally or in writing from time to time, neither as predictions of future events nor guarantees of future performance.

PUBLIC STORAGE

SELECTED INCOME STATEMENT DATA

(Amounts in thousands, except per share data)

(Unaudited)

 

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

2021

 

2020

 

2021

 

2020

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

Self-storage facilities

$

776,993

 

 

$

664,542

 

 

$

1,493,340

 

 

$

1,338,743

 

Ancillary operations

52,322

 

 

48,401

 

 

103,237

 

 

93,244

 

 

829,315

 

 

712,943

 

 

1,596,577

 

 

1,431,987

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

Self-storage cost of operations

202,595

 

 

216,954

 

 

414,700

 

 

428,050

 

Ancillary cost of operations

15,991

 

 

15,335

 

 

32,309

 

 

28,907

 

Depreciation and amortization

172,728

 

 

137,618

 

 

319,587

 

 

273,518

 

General and administrative

27,740

 

 

17,104

 

 

47,314

 

 

34,972

 

Interest expense

21,994

 

 

14,145

 

 

37,244

 

 

27,766

 

 

441,048

 

 

401,156

 

 

851,154

 

 

793,213

 

Other increases (decreases) to net income:

 

 

 

 

 

 

 

Interest and other income

3,113

 

 

5,665

 

 

5,965

 

 

11,784

 

Equity in earnings of unconsolidated real estate entities

29,066

 

 

17,655

 

 

48,522

 

 

41,623

 

Gain on sale of real estate

3,991

 

 

 

 

13,404

 

 

1,117

 

Foreign currency exchange (loss) gain

(12,707)

 

 

(19,295)

 

 

32,678

 

 

(10,350)

 

Net income

411,730

 

 

315,812

 

 

845,992

 

 

682,948

 

Allocation to noncontrolling interests

(1,304)

 

 

(889)

 

 

(2,530)

 

 

(1,869)

 

Net income allocable to Public Storage shareholders

410,426

 

 

314,923

 

 

843,462

 

 

681,079

 

Allocation of net income to:

 

 

 

 

 

 

 

Preferred shareholders – distributions

(46,183)

 

 

(52,952)

 

 

(92,263)

 

 

(104,957)

 

Preferred shareholders – redemptions

(16,989)

 

 

(15,069)

 

 

(16,989)

 

 

(15,069)

 

Restricted share units

(1,005)

 

 

(783)

 

 

(2,151)

 

 

(1,800)

 

Net income allocable to common shareholders

$

346,249

 

 

$

246,119

 

 

$

732,059

 

 

$

559,253

 

 

 

 

 

 

 

 

 

Per common share:

 

 

 

 

 

 

 

Net income per common share – Basic

$

1.98

 

 

$

1.41

 

 

$

4.19

 

 

$

3.21

 

Net income per common share – Diluted

$

1.97

 

 

$

1.41

 

 

$

4.18

 

 

$

3.20

 

Weighted average common shares – Basic

174,824

 

 

174,493

 

 

174,718

 

 

174,470

 

Weighted average common shares – Diluted

175,547

 

 

174,575

 

 

175,194

 

 

174,596

 

PUBLIC STORAGE

SELECTED BALANCE SHEET DATA

(Amounts in thousands, except share and per share data)

 

 

June 30, 2021

 

December 31, 2020

ASSETS

(Unaudited)

 

 

 

 

 

 

Cash and equivalents

$

480,810

 

 

$

257,560

 

 

 

 

 

Operating real estate facilities:

 

 

 

Land and buildings, at cost

19,977,932

 

 

17,372,627

 

Accumulated depreciation

(7,435,657)

 

 

(7,152,135)

 

 

12,542,275

 

 

10,220,492

 

Construction in process

249,713

 

 

188,079

 

Investments in unconsolidated real estate entities

767,914

 

 

773,046

 

Goodwill and other intangible assets, net

265,486

 

 

204,654

 

Other assets

184,167

 

 

172,715

 

Total assets

$

14,490,365

 

 

$

11,816,546

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

Senior unsecured notes

$

4,971,454

 

 

$

2,519,762

 

Mortgage notes

24,166

 

 

25,230

 

Preferred shares called for redemption

325,000

 

 

300,000

 

Accrued and other liabilities

406,642

 

 

394,655

 

Total liabilities

5,727,262

 

 

3,239,647

 

 

 

 

 

Equity:

 

 

 

Public Storage shareholders’ equity:

 

 

 

Cumulative Preferred Shares, $0.01 par value, 100,000,000 shares authorized, 154,850 shares issued (in series) and outstanding, (151,700 at December 31, 2020) at liquidation preference

3,871,250

 

 

3,792,500

 

Common Shares, $0.10 par value, 650,000,000 shares authorized, 174,864,437 shares issued and outstanding (174,581,742 shares at December 31, 2020)

17,486

 

 

17,458

 

Paid-in capital

5,764,672

 

 

5,707,101

 

Accumulated deficit

(863,742)

 

 

(914,791)

 

Accumulated other comprehensive loss

(46,082)

 

 

(43,401)

 

Total Public Storage shareholders’ equity

8,743,584

 

 

8,558,867

 

Noncontrolling interests

19,519

 

 

18,032

 

Total equity

8,763,103

 

 

8,576,899

 

Total liabilities and equity

$

14,490,365

 

 

$

11,816,546

 

PUBLIC STORAGE

SELECTED FINANCIAL DATA

 

Computation of Funds from Operations and Funds Available for Distribution

(Unaudited – amounts in thousands except per share data)

 

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

2021

 

2020

 

2021

 

2020

 

 

 

 

 

 

 

 

Computation of FFO per Share:

 

 

 

 

 

 

 

Net income allocable to common shareholders

$

346,249

 

 

$

246,119

 

 

$

732,059

 

 

$

559,253

 

Eliminate items excluded from FFO:

 

 

 

 

 

 

 

Depreciation and amortization

171,738

 

 

136,821

 

 

317,607

 

 

271,958

 

Depreciation from unconsolidated real estate investments

17,343

 

 

16,872

 

 

35,276

 

 

35,115

 

Depreciation allocated to noncontrolling interests and restricted share unitholders

(1,124)

 

 

(938)

 

 

(2,095)

 

 

(1,899)

 

Gains on sale of real estate, including equity investment share

(9,197)

 

 

 

 

(18,584)

 

 

(9,241)

 

FFO allocable to common shares (a)

$

525,009

 

 

$

398,874

 

 

$

1,064,263

 

 

$

855,186

 

Diluted weighted average common shares

175,547

 

 

174,575

 

 

175,194

 

 

174,596

 

FFO per share (a)

$

2.99

 

 

$

2.28

 

 

$

6.07

 

 

$

4.90

 

Reconciliation of Diluted Earnings per Share to FFO per Share:

 

 

 

 

 

 

 

Diluted earnings per share

$

1.97

 

 

$

1.41

 

 

$

4.18

 

 

$

3.20

 

Eliminate per share amounts excluded from FFO:

 

 

 

 

 

 

 

Depreciation and amortization

1.07

 

 

0.87

 

 

2.00

 

 

1.75

 

Gains on sale of real estate

(0.05)

 

 

 

 

(0.11)

 

 

(0.05)

 

FFO per share (a)

$

2.99

 

 

$

2.28

 

 

$

6.07

 

 

$

4.90

 

Computation of Funds Available for Distribution ("FAD"):

 

 

 

 

 

 

 

FFO allocable to common shares

$

525,009

 

 

$

398,874

 

 

$

1,064,263

 

 

$

855,186

 

Eliminate effect of items included in FFO but not FAD:

 

 

 

 

 

 

 

Share-based compensation expense in excess of cash paid

18,075

 

 

6,546

 

 

25,198

 

 

3,716

 

Foreign currency exchange loss (gain)

12,707

 

 

19,295

 

 

(32,678)

 

 

10,350

 

Impact of preferred share redemption charges, including equity investment share

16,989

 

 

15,069

 

 

16,989

 

 

15,069

 

Less: Capital expenditures to maintain real estate facilities

(58,823)

 

 

(38,772)

 

 

(94,616)

 

 

(95,629)

 

FAD (a)

$

513,957

 

 

$

401,012

 

 

$

979,156

 

 

$

788,692

 

Distributions paid to common shareholders and restricted share units

$

350,054

 

 

$

349,834

 

 

$

700,150

 

 

$

699,636

 

Distribution payout ratio

68.1

%

 

87.2

%

 

71.5

%

 

88.7

%

Distributions per common share

$

2.00

 

 

$

2.00

 

 

$

4.00

 

 

$

4.00

 

(a)

FFO and FFO per share are non-GAAP measures defined by the National Association of Real Estate Investment Trusts and, along with the non-GAAP measure FAD, are considered helpful measures of REIT performance by REITs and many REIT analysts. FFO represents GAAP net income before depreciation and amortization, real estate gains or losses and impairment charges, which are excluded because they are based upon historical costs and assume that building values diminish ratably over time, while we believe that real estate values fluctuate due to market conditions. FAD represents FFO adjusted to exclude certain non-cash charges and to deduct capital expenditures. We utilize FAD in evaluating our ongoing cash flow available for investment, debt repayment and common distributions. We believe investors and analysts utilize FAD in a similar manner. FFO and FFO per share are not a substitute for net income or earnings per share. FFO and FAD are not substitutes for GAAP net cash flow in evaluating our liquidity or ability to pay dividends, because they exclude investing and financing activities presented on our statements of cash flows. In addition, other REITs may compute these measures differently, so comparisons among REITs may not be helpful.

PUBLIC STORAGE

SELECTED FINANCIAL DATA

 

Reconciliation of Self-Storage Net Operating Income to

Net Income

(Unaudited – amounts in thousands)

 

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

2021

 

2020

 

2021

 

2020

 

 

 

 

 

 

 

 

Self-storage revenues for:

 

 

 

 

 

 

 

Same Store Facilities

$

680,838

 

 

$

614,418

 

 

$

1,328,655

 

 

$

1,241,109

 

Acquired facilities

42,395

 

 

9,359

 

 

62,564

 

 

17,102

 

Developed and expanded facilities

48,019

 

 

35,617

 

 

90,958

 

 

70,318

 

Other Non-Same Store facilities

5,741

 

 

5,148

 

 

11,163

 

 

10,214

 

Self-storage revenues

776,993

 

 

664,542

 

 

1,493,340

 

 

1,338,743

 

 

 

 

 

 

 

 

 

Self-storage cost of operations for:

 

 

 

 

 

 

 

Same Store Facilities

167,174

 

 

192,345

 

 

348,186

 

 

381,534

 

Acquired facilities

15,147

 

 

5,044

 

 

25,854

 

 

8,750

 

Developed and expanded facilities

18,263

 

 

17,109

 

 

36,401

 

 

33,201

 

Other Non-Same Store facilities

2,011

 

 

2,456

 

 

4,259

 

 

4,565

 

Self-storage cost of operations

202,595

 

 

216,954

 

 

414,700

 

 

428,050

 

 

 

 

 

 

 

 

 

Self-storage NOI for:

 

 

 

 

 

 

 

Same Store Facilities

513,664

 

 

422,073

 

 

980,469

 

 

859,575

 

Acquired facilities

27,248

 

 

4,315

 

 

36,710

 

 

8,352

 

Developed and expanded facilities

29,756

 

 

18,508

 

 

54,557

 

 

37,117

 

Other Non-Same Store facilities

3,730

 

 

2,692

 

 

6,904

 

 

5,649

 

Self-storage NOI (a)

574,398

 

 

447,588

 

 

1,078,640

 

 

910,693

 

Ancillary revenues

52,322

 

 

48,401

 

 

103,237

 

 

93,244

 

Ancillary cost of operations

(15,991)

 

 

(15,335)

 

 

(32,309)

 

 

(28,907)

 

Depreciation and amortization

(172,728)

 

 

(137,618)

 

 

(319,587)

 

 

(273,518)

 

General and administrative expense

(27,740)

 

 

(17,104)

 

 

(47,314)

 

 

(34,972)

 

Interest and other income

3,113

 

 

5,665

 

 

5,965

 

 

11,784

 

Interest expense

(21,994)

 

 

(14,145)

 

 

(37,244)

 

 

(27,766)

 

Equity in earnings of unconsolidated real estate entities

29,066

 

 

17,655

 

 

48,522

 

 

41,623

 

Gain on sale of real estate

3,991

 

 

 

 

13,404

 

 

1,117

 

Foreign currency exchange (loss) gain

(12,707)

 

 

(19,295)

 

 

32,678

 

 

(10,350)

 

Net income on our income statement

$

411,730

 

 

$

315,812

 

 

$

845,992

 

 

$

682,948

 

(a)

Net operating income or “NOI” is a non-GAAP financial measure that excludes the impact of depreciation and amortization expense, which is based upon historical costs and assumes that building values diminish ratably over time, while we believe that real estate values fluctuate due to market conditions. We utilize NOI in determining current property values, evaluating property performance, and in evaluating operating trends. We believe that investors and analysts utilize NOI in a similar manner. NOI is not a substitute for net income, operating cash flow, or other related GAAP financial measures, in evaluating our operating results. This table reconciles from NOI for our self-storage facilities to the net income presented on our income statement.

 

Ryan Burke
(818) 244-8080, Ext. 1141

Source: Public Storage