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Public Storage's (PSA) Q4 FFO & Revenues Top Estimates

Public Storage PSA reported fourth-quarter 2022 core funds from operations (FFO) per share of $4.16, increasing 17.5% year over year. The core FFO per share, excluding the contribution from the company’s equity investment in PS Business Parks, Inc., was $4.16. Both figures surpassed the Zacks Consensus Estimate of $3.99.

Results reflect better-than-anticipated top-line growth, aided by an improvement in the realized annual rent per occupied square foot. The company also benefited from its expansion efforts through acquisitions, developments and extensions.

Quarterly revenues of $1.09 billion exceeded the Zacks Consensus Estimate of $1.08 billion. Moreover, revenues increased 17.8% year over year.

In 2022, Public Storage reported core FFO per share of $15.92, up 23.1% from $12.93 in the prior year, and beat the Zacks Consensus Estimate of $15.75. Revenues of $4.18 billion surged 22.4% year over year and outpaced the consensus mark of $4.17 billion.

Behind the Headlines

Public Storage’s same-store revenues increased 13.3% year over year to $818.9 million in the fourth quarter, highlighting the higher realized annual rent per occupied square foot, partially offset by a decline in occupancy. This storage REIT witnessed a 15.7% increase in the realized annual rental income per occupied square foot to $22.74. However, the weighted-average square foot occupancy of 93.4% was down 2.6% year over year.

The same-store cost of operations increased 5.3% year over year, mainly reflecting a rise in property tax expense, marketing expense, other direct property costs and repairs and maintenance.

Consequently, PSA’s same-store net operating income (NOI) increased 15.8% to $637.5 million. Also, this REIT’s NOI growth from non-same-store facilities was $50.5 million due to the facilities acquired in 2021 and the fill-up of recently developed and expanded facilities.

Public Storage achieved an 81.2% same-store direct NOI margin in the quarter, reflecting an increase of 1.8% year over year.

Portfolio Activity

In the fourth quarter, Public Storage acquired 30 self-storage facilities comprising 1.6 million net rentable square feet of area for $228.6 million. Following Dec 31, 2022, the company acquired or was under contract to buy eight self-storage facilities spanning 0.5 million net rentable square feet of space for $70.5 million.

The company opened three newly developed facilities and completed several expansion projects with 0.5 million net rentable square feet costing $101.2 million.

As of Dec 31, 2022, PSA had several facilities in development (2.1 million net rentable square feet) with an estimated cost of $492.3 million and several expansion projects (2.5 million net rentable square feet) worth $487.3 million. It expects to incur the remaining $606.6 million of development costs related to these projects, mainly over the next 18 to 24 months.

Balance Sheet Position

Public Storage exited fourth-quarter 2022 with $775.2 of cash and equivalents, down from $883.8 million as of Sep 30, 2022.

2023 Guidance

Public Storage issued guidance for 2023.

It projects 2023 core FFO per share in the range of $16.10-$16.80. The Zacks Consensus Estimate for the same stands at $16.82.

The company’s full-year assumption is backed by 2.5-5% growth in same-store revenues, a 4.75% to 6.75% rise in same-store expenses and a 1.2% to 5.1% expansion in same-store NOI.

Further, the company expects $750 million in acquisitions and $375 million in development openings.

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

Boston Properties Inc.’s BXP fourth-quarter 2022 FFO per share of $1.86 outpaced the Zacks Consensus Estimate of $1.84. The figure increased 18.7% year over year.

The quarterly figure also exceeded the mid-point of the company’s fourth-quarter guidance by a cent, reflecting portfolio outperformance. In addition, BXP experienced solid leasing activity in the quarter. The company revised its 2023 outlook for FFO per share.

Highwoods Properties Inc. HIW reported fourth-quarter 2022 FFO per share of 96 cents, in line with the Zacks Consensus Estimate. The figure compared unfavorably with the prior-year quarter’s $1.06. We estimated FFO per share for fourth-quarter 2022 to be 96 cents.

HIW’s quarterly results reflect better-than-anticipated revenues on robust leasing activity and improvement in rents. However, higher operating expenses were a headwind in the quarter.

Alexandria Real Estate Equities, Inc. ARE reported fourth-quarter 2022 AFFO per share of $2.14, surpassing the Zacks Consensus Estimate by a cent. The reported figure also compared favorably with the year-ago quarter’s $1.97.

ARE’s results reflected decent leasing activity and rental rate growth during the quarter.

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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