Public Storage Reports Results for the Fourth Quarter and Year Ended December 31, 2019

Company Release - 2/25/2020 4:00 PM ET

GLENDALE, Calif.--(BUSINESS WIRE)-- Public Storage (NYSE:PSA) announced today operating results for the fourth quarter and year ended December 31, 2019.

Operating Results for the Three Months Ended December 31, 2019

For the three months ended December 31, 2019, net income allocable to our common shareholders was $327.3 million or $1.87 per diluted common share, compared to $530.1 million or $3.04 per diluted common share in 2018 representing a decrease of $202.8 million or $1.17 per diluted common share. The decrease is due primarily to (i) $183.1 million in aggregate gains due to Shurgard Self Storage SA’s (“Shurgard’s”) initial public offering and the sale of our facility in West London to Shurgard in October 2018, (ii) a $15.7 million decrease due to the impact of foreign currency exchange gains and losses associated with our euro denominated debt and (iii) a $6.2 million allocation to our preferred shareholders associated with our preferred share redemption activities in the three months ended December 31, 2019, offset partially by (iv) a $10.3 million increase in self-storage net operating income (described below) and (v) a reduction in general and administrative expense attributable to $8.1 million in incremental share-based compensation expense in the three months ended December 31, 2018 for the planned retirement of our former CEO and CFO.

The $10.3 million increase in self-storage net operating income is a result of a $0.7 million increase in our Same Store Facilities (as defined below) and a $9.6 million increase in our non-Same Store Facilities (as defined below). Revenues for the Same Store Facilities increased 1.1% or $6.6 million in the three months ended December 31, 2019 as compared to 2018, due primarily to higher realized annual rent per occupied square foot. Cost of operations for the Same Store Facilities increased by 4.6% or $5.9 million in the three months ended December 31, 2019 as compared to 2018, due primarily to a 40% ($3.7 million) increase in marketing expenses, increased property manager payroll and increased property tax expense. The increase in net operating income of $9.6 million for the non-Same Store Facilities is due primarily to the impact of facilities acquired in 2018 and 2019 and the fill-up of recently developed and expanded facilities.

Operating Results for the Year Ended December 31, 2019

In 2019, net income allocable to our common shareholders was $1,272.8 million or $7.29 per diluted common share, compared to $1,488.9 million or $8.54 per diluted common share in 2018 representing a decrease of $216.1 million or $1.25 per diluted common share. The decrease is due primarily to (i) $183.1 million in aggregate gains due to Shurgard’s initial public offering and the sale of our facility in West London to Shurgard in October 2018, (ii) our $37.7 million equity share of gains recorded by PS Business Parks during 2018, (iii) a $10.3 million decrease due to the impact of foreign currency exchange gains associated with our euro denominated debt and (iv) a $32.7 million allocation to our preferred shareholders associated with our preferred share redemption activities in 2019. These impacts were offset partially by a $30.1 million increase in self-storage net operating income (described below) and a reduction in general and administrative expense attributable to $30.7 million in incremental share-based compensation expense in 2018 for the planned retirement of our former CEO and CFO.

The $30.1 million increase in self-storage net operating income is a result of a $2.6 million increase in our Same Store Facilities and $27.5 million increase in our non-Same Store Facilities. Revenues for the Same Store Facilities increased 1.4% or $33.3 million in 2019 as compared to 2018, due primarily to higher realized annual rent per occupied square foot. Cost of operations for the Same Store Facilities increased by 5.0% or $30.6 million in 2019 as compared to 2018, due primarily to a 47.2% ($15.3 million) increase in marketing expenses and increased property taxes. The increase in net operating income of $27.5 million for the non-Same Store Facilities is due primarily to the impact of facilities acquired in 2018 and 2019 and the fill-up of recently developed and expanded facilities.

Funds from Operations

For the three months ended December 31, 2019, funds from operations (“FFO”) was $2.72 per diluted common share, as compared to $2.77 in 2018, representing a decrease of 1.8%. 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 year ended December 31, 2019, FFO was $10.58 per diluted common share, as compared to $10.45 in 2018, representing an increase of 1.2%.

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) EITF D-42 charges related to the redemption of preferred securities, (iii) accelerations of accruals or reductions in accruals due to the departure of senior executives and (iv) certain other non-cash and/or nonrecurring income or expense items. 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 December 31,

 

Year ended December 31,

 

 

 

 

 

 

 

 

Percentage

 

 

 

 

 

 

 

Percentage

 

 

2019

 

2018

 

Change

 

2019

 

2018

 

Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FFO per share

$

2.72

 

$

2.77

 

(1.8)%

 

$

10.58

 

$

10.45

 

1.2%

Eliminate the per share impact of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

items excluded from Core FFO, including

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

our equity share from investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency exchange loss (gain)

 

0.06

 

 

(0.03)

 

 

 

 

(0.04)

 

 

(0.10)

 

 

Application of EITF D-42

 

0.06

 

 

-

 

 

 

 

0.21

 

 

-

 

 

Shurgard - IPO costs and casualty loss

 

-

 

 

0.02

 

 

 

 

-

 

 

0.03

 

 

Acceleration/(Forfeiture) of share-based

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

compensation expense due to the

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

departure of senior executives

 

-

 

 

0.05

 

 

 

 

(0.01)

 

 

0.18

 

 

Other items

 

-

 

 

-

 

 

 

 

0.01

 

 

-

 

 

Core FFO per share

$

2.84

 

$

2.81

 

1.1%

 

$

10.75

 

$

10.56

 

1.8%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property Operations – Same Store Facilities

The Same Store Facilities represent those facilities that have been owned and operated on a stabilized level of occupancy, revenues and cost of operations since January 1, 2017. We review the operations of our Same Store Facilities, which excludes facilities whose operating trends are significantly affected by factors such as casualty events, as well as recently developed or acquired facilities, to more effectively evaluate the ongoing performance of our self-storage portfolio in 2017, 2018 and 2019. We believe the Same Store information is used by investors and REIT analysts in a similar manner. The following table summarizes the historical operating results of these 2,159 facilities (139.3 million net rentable square feet) that represent approximately 82% of the aggregate net rentable square feet of our U.S. consolidated self-storage portfolio at December 31, 2019.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selected Operating Data for the Same

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Store Facilities (2,159 facilities)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(unaudited):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31,

 

Year ended December 31,

 

 

 

 

 

 

 

Percentage

 

 

 

 

 

 

 

Percentage

 

2019

 

2018

 

Change

 

2019

 

2018

 

Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental income

$

572,192

 

$

565,417

 

1.2%

 

$

2,290,721

 

$

2,258,099

 

1.4%

Late charges and administrative fees

 

25,905

 

 

26,073

 

(0.6)%

 

 

103,851

 

 

103,199

 

0.6%

Total revenues (a)

 

598,097

 

 

591,490

 

1.1%

 

 

2,394,572

 

 

2,361,298

 

1.4%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property taxes

 

37,387

 

 

36,286

 

3.0%

 

 

233,453

 

 

223,088

 

4.6%

On-site property manager payroll

 

27,562

 

 

25,943

 

6.2%

 

 

118,450

 

 

115,531

 

2.5%

Supervisory payroll

 

8,377

 

 

7,887

 

6.2%

 

 

37,771

 

 

37,179

 

1.6%

Repairs and maintenance

 

11,330

 

 

11,709

 

(3.2)%

 

 

46,078

 

 

44,896

 

2.6%

Snow removal

 

861

 

 

719

 

19.7%

 

 

3,954

 

 

3,592

 

10.1%

Utilities

 

10,031

 

 

10,404

 

(3.6)%

 

 

42,209

 

 

43,457

 

(2.9)%

Marketing

 

12,853

 

 

9,178

 

40.0%

 

 

47,622

 

 

32,344

 

47.2%

Other direct property costs

 

15,709

 

 

15,459

 

1.6%

 

 

63,572

 

 

62,042

 

2.5%

Allocated overhead

 

11,671

 

 

12,254

 

(4.8)%

 

 

48,809

 

 

49,144

 

(0.7)%

Total cost of operations (a)

 

135,781

 

 

129,839

 

4.6%

 

 

641,918

 

 

611,273

 

5.0%

Net operating income (b)

$

462,316

 

$

461,651

 

0.1%

 

$

1,752,654

 

$

1,750,025

 

0.2%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross margin

 

77.3%

 

 

78.0%

 

(0.9)%

 

 

73.2%

 

 

74.1%

 

(1.2)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average for the period:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Square foot occupancy

 

93.1%

 

 

92.5%

 

0.6%

 

 

93.5%

 

 

93.1%

 

0.4%

Realized annual rental income per (c):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Occupied square foot

$

17.66

 

$

17.55

 

0.6%

 

$

17.60

 

$

17.41

 

1.1%

Available square foot (“REVPAF”)

$

16.44

 

$

16.23

 

1.3%

 

$

16.45

 

$

16.21

 

1.5%

At December 31:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Square foot occupancy

 

 

 

 

 

 

 

 

 

91.8%

 

 

91.3%

 

0.5%

Annual contract rent per occupied

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

square foot (d)

 

 

 

 

 

 

 

 

$

18.12

 

$

18.03

 

0.5%

(a)

Revenues and cost of operations do not include ancillary revenues and expenses generated at the facilities with respect to tenant reinsurance and retail sales.

(b)

See attached reconciliation of self-storage net operating income (“NOI”) to net income.

(c)

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.

(d)

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:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2019

$

586,004

 

$

599,244

 

$

611,227

 

$

598,097

 

$

2,394,572

2018

$

577,310

 

$

587,793

 

$

604,705

 

$

591,490

 

$

2,361,298

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total cost of operations:

 

 

 

 

 

 

 

 

 

 

 

 

2019

$

168,359

 

$

166,913

 

$

170,865

 

$

135,781

 

$

641,918

2018

$

162,034

 

$

158,857

 

$

160,543

 

$

129,839

 

$

611,273

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property taxes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2019

$

64,945

 

$

65,671

 

$

65,450

 

$

37,387

 

$

233,453

2018

$

61,858

 

$

62,571

 

$

62,373

 

$

36,286

 

$

223,088

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Repairs and maintenance, including

 

 

 

 

 

 

 

 

 

 

 

 

snow removal expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2019

$

13,369

 

$

11,687

 

$

12,785

 

$

12,191

 

$

50,032

2018

$

12,124

 

$

12,081

 

$

11,855

 

$

12,428

 

$

48,488

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marketing:

 

 

 

 

 

 

 

 

 

 

 

 

2019

$

8,751

 

$

12,084

 

$

13,934

 

$

12,853

 

$

47,622

2018

$

6,855

 

$

8,090

 

$

8,221

 

$

9,178

 

$

32,344

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

REVPAF:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2019

$

16.08

 

$

16.48

 

$

16.79

 

$

16.44

 

$

16.45

2018

$

15.84

 

$

16.17

 

$

16.60

 

$

16.23

 

$

16.21

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average realized annual

 

 

 

 

 

 

 

 

 

 

 

 

rent per occupied square foot:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2019

$

17.38

 

$

17.53

 

$

17.82

 

$

17.66

 

$

17.60

2018

$

17.19

 

$

17.23

 

$

17.69

 

$

17.55

 

$

17.41

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average occupancy levels

 

 

 

 

 

 

 

 

for the period:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2019

 

92.5%

 

 

94.0%

 

 

94.2%

 

 

93.1%

 

 

93.5%

2018

 

92.1%

 

 

93.8%

 

 

93.8%

 

 

92.5%

 

 

93.1%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The following table sets forth selected market trends in our Same Store Facilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same Store Facilities Operating Trends by Market (Unaudited)

 

 

 

 

 

 

 

 

Three Months Ended December 31,

 

Year Ended December 31,

 

 

2019

 

 

2018

 

Change

 

 

2019

 

 

2018

 

Change

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Los Angeles

$

91,070

 

$

89,024

 

2.3%

 

$

362,057

 

$

352,672

 

2.7%

San Francisco

 

50,904

 

 

49,847

 

2.1%

 

 

203,195

 

 

199,162

 

2.0%

New York

 

37,861

 

 

37,482

 

1.0%

 

 

151,526

 

 

148,676

 

1.9%

Washington DC

 

28,495

 

 

27,907

 

2.1%

 

 

113,607

 

 

110,642

 

2.7%

Seattle-Tacoma

 

26,914

 

 

26,566

 

1.3%

 

 

107,639

 

 

106,261

 

1.3%

Miami

 

28,016

 

 

28,433

 

(1.5)%

 

 

112,734

 

 

114,428

 

(1.5)%

Atlanta

 

21,205

 

 

21,293

 

(0.4)%

 

 

85,885

 

 

84,450

 

1.7%

Chicago

 

29,760

 

 

29,075

 

2.4%

 

 

118,293

 

 

117,094

 

1.0%

Dallas-Ft. Worth

 

20,463

 

 

20,610

 

(0.7)%

 

 

82,281

 

 

83,155

 

(1.1)%

Orlando-Daytona

 

15,131

 

 

14,996

 

0.9%

 

 

60,640

 

 

59,901

 

1.2%

Houston

 

16,701

 

 

17,510

 

(4.6)%

 

 

67,962

 

 

71,266

 

(4.6)%

Philadelphia

 

14,858

 

 

14,417

 

3.1%

 

 

59,120

 

 

56,747

 

4.2%

Tampa

 

11,426

 

 

11,543

 

(1.0)%

 

 

46,083

 

 

46,377

 

(0.6)%

West Palm Beach

 

10,990

 

 

10,923

 

0.6%

 

 

43,959

 

 

43,630

 

0.8%

Portland

 

9,909

 

 

10,052

 

(1.4)%

 

 

40,163

 

 

40,622

 

(1.1)%

All other markets

 

184,394

 

 

181,812

 

1.4%

 

 

739,428

 

 

726,215

 

1.8%

Total revenues

$

598,097

 

$

591,490

 

1.1%

 

$

2,394,572

 

$

2,361,298

 

1.4%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Los Angeles

$

77,281

 

$

75,221

 

2.7%

 

$

298,725

 

$

292,281

 

2.2%

San Francisco

 

41,652

 

 

41,192

 

1.1%

 

 

163,878

 

 

162,202

 

1.0%

New York

 

29,970

 

 

30,097

 

(0.4)%

 

 

107,992

 

 

107,351

 

0.6%

Washington DC

 

22,314

 

 

21,802

 

2.3%

 

 

84,329

 

 

82,745

 

1.9%

Seattle-Tacoma

 

22,449

 

 

21,357

 

5.1%

 

 

84,315

 

 

83,375

 

1.1%

Miami

 

24,781

 

 

26,164

 

(5.3)%

 

 

84,269

 

 

87,277

 

(3.4)%

Atlanta

 

16,671

 

 

16,643

 

0.2%

 

 

63,630

 

 

62,519

 

1.8%

Chicago

 

18,906

 

 

18,801

 

0.6%

 

 

63,228

 

 

64,906

 

(2.6)%

Dallas-Ft. Worth

 

16,315

 

 

16,628

 

(1.9)%

 

 

56,623

 

 

58,461

 

(3.1)%

Orlando-Daytona

 

11,855

 

 

11,879

 

(0.2)%

 

 

44,116

 

 

44,066

 

0.1%

Houston

 

10,280

 

 

11,753

 

(12.5)%

 

 

42,380

 

 

47,071

 

(10.0)%

Philadelphia

 

10,712

 

 

10,430

 

2.7%

 

 

41,773

 

 

40,097

 

4.2%

Tampa

 

8,803

 

 

8,947

 

(1.6)%

 

 

32,416

 

 

33,378

 

(2.9)%

West Palm Beach

 

8,215

 

 

8,446

 

(2.7)%

 

 

32,192

 

 

32,397

 

(0.6)%

Portland

 

7,927

 

 

8,034

 

(1.3)%

 

 

30,511

 

 

31,548

 

(3.3)%

All other markets

 

134,185

 

 

134,257

 

(0.1)%

 

 

522,277

 

 

520,351

 

0.4%

Total net operating income

$

462,316

$

461,651

0.1%

$

1,752,654

$

1,750,025

0.2%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31,

 

 

Year Ended December 31,

 

 

2019

 

2018

 

Change

 

 

2019

 

2018

 

Change

Weighted average square foot

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

occupancy:

 

 

 

 

 

 

 

 

 

Los Angeles

 

95.4%

 

 

94.6%

 

0.8%

 

 

95.2%

 

 

95.0%

 

0.2%

San Francisco

 

93.8%

 

 

93.5%

 

0.3%

 

 

94.3%

 

 

94.4%

 

(0.1)%

New York

 

93.7%

 

 

93.8%

 

(0.1)%

 

 

94.1%

 

 

94.3%

 

(0.2)%

Washington DC

 

92.5%

 

 

91.8%

 

0.8%

 

 

93.4%

 

 

92.4%

 

1.1%

Seattle-Tacoma

 

92.3%

 

 

92.0%

 

0.3%

 

 

93.1%

 

 

93.2%

 

(0.1)%

Miami

 

93.1%

 

 

92.4%

 

0.8%

 

 

93.0%

 

 

92.9%

 

0.1%

Atlanta

 

92.2%

 

 

93.0%

 

(0.9)%

 

 

93.0%

 

 

93.2%

 

(0.2)%

Chicago

 

92.4%

 

 

90.1%

 

2.6%

 

 

92.1%

 

 

90.3%

 

2.0%

Dallas-Ft. Worth

 

91.9%

 

 

91.2%

 

0.8%

 

 

92.0%

 

 

91.4%

 

0.7%

Orlando-Daytona

 

93.3%

 

 

93.2%

 

0.1%

 

 

94.1%

 

 

94.5%

 

(0.4)%

Houston

 

90.9%

 

 

89.8%

 

1.2%

 

 

89.7%

 

 

90.9%

 

(1.3)%

Philadelphia

 

94.6%

 

 

94.7%

 

(0.1)%

 

 

95.3%

 

 

94.9%

 

0.4%

Tampa

 

92.3%

 

 

91.7%

 

0.7%

 

 

92.6%

 

 

92.9%

 

(0.3)%

West Palm Beach

 

93.9%