Public Storage FFO Dips - Analyst Blog

Public Storage (PSA), a real estate investment trust (REIT) operating self-storage facilities, reported first quarter 2010 FFO (funds from operations) of $0.78 per share, compared to $1.51 in the year-earlier quarter. Funds from operations, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income. 

The decrease in year-over-year FFO was primarily due to several non-recurring items, excluding which FFO for first quarter 2010 was $1.15 per share compared to $1.16 in the year-ago quarter. 

During the quarter, Public Storage also reported a decline in total revenues to $398.1 million, compared to $404.2 million in the year-earlier quarter. The year-over-year decrease in revenue was primarily due to a reduction in realized rent per square foot. 

Same-store revenues decreased 2.2% year-over-year to $347.8 million during the quarter, while net operating income declined 3.0% to $221.3 million. Overall occupancy in the same-store portfolio was 88.9% at quarter-end versus 88.2% in the prior-year period. Realized annual rent per occupied square foot decreased from $12.84 in the year-earlier quarter to $12.46 in the reported quarter – a year-over-year decrease of 3.0%. 

Public Storage currently has a 49% stake in Shurgard Europe, which has interests in 187 facilities (10 million net rentable square feet) located in seven Western European countries. Public Storage is also the managing member of the JV that owns Shurgard Europe. 

Subsequent to quarter-end, Public Storage announced plans to acquire 30 self-storage facilities spanning across 1.9 million square feet of space for $189 million, including debt assumption of approximately $100 million. About 28 of the 30 facilities (1.8 million square feet) are located in the Los Angeles area and the adjacent Southern California market, while the remaining two properties are located in Chicago. With the acquisition, the company intends to strengthen its position in these markets, increasing its market presence by as much as 20%. 

At quarter-end, Public Storage had $720 million of cash and access to $300 million line of credit. Total outstanding debt as of Mar 31, 2010 was $516.1 million with no significant debt maturities before 2011. During the quarter, funds from operations available for distribution among common shareholders (FAD) exceeded the regular common distributions by about $80 million. Management also increased the quarterly dividend by 23.1% from $0.65 per share to $0.80.

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