Public Storage Quarterly Report for the Period Ended March 31, 2024
Public Storage, a real estate investment trust, reported a strong financial performance in the quarter ending March 31, 2024. The company’s revenue and net income increased significantly, driven by growth in same-store revenue and new acquisitions. Public Storage continues to focus on expanding its portfolio and improving its operations, which has contributed to its financial success.
Overview
Public Storage is a real estate investment trust (REIT) that invests in self-storage facilities. In the first quarter of 2024, revenues from same-store facilities (open since 2022) increased 0.1% while costs rose 4.8%. Demand softened in late 2022 and remains weak, but is expected to stabilize by late 2024.
Public Storage has grown by acquiring and developing facilities. Since 2022, the company acquired 238 facilities with 16.8 million square feet for $3.4 billion. Newly developed and expanded facilities now total 123 properties with 14.3 million square feet, representing $1.3 billion in investment. In Q1 2024, these facilities generated an 82.7% increase in net operating income versus Q1 2023.
Inflationary Pressures
Public Storage has faced inflationary pressure on operating costs like labor, utilities, repairs, development, and expansion. Initiatives to mitigate impact include technology investments to reduce payroll and achieve economies of scale, plus solar power and LED lights to lower utility usage.
Property Upgrades
Public Storage continues a multi-year modernization program to improve aesthetics and layouts at certain properties, helping locations compete with new facilities. In Q1 2024, $25 million was spent on upgrades with a 2024 budget of $150 million. Solar panels are also being installed at over 1,000 locations after $13 million in Q1 2024 spend and a $100 million full-year budget.
Recent Financing Activity
In April 2024, Public Storage raised $1.05 billion through senior unsecured note issuances, using proceeds to repay $808 million of notes maturing in April 2024. The company also expanded its revolving credit facility by $1 billion to $1.5 billion in June 2023.
Financial Performance
Q1 2024 vs. Q1 2023
- Net income decreased 1.8% to $459.2 million
- Per diluted share net income decreased 1.9% to $2.60
- Self-storage net operating income increased $25.1 million
| Key Financial Results | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Total revenues | $1.09 billion | $1.03 billion | +5.2% |
| Net income | $459.2 million | $467.6 million | -1.8% |
| Diluted EPS | $2.60 | $2.65 | -1.9% |
Same-Store Facilities
- Revenues +0.1% due to higher annual rent per occupied square foot, partially offset by lower occupancy
- Costs +4.8% mostly from increased property taxes and marketing spend
Non Same-Store Facilities
- Acquired facilities revenue +387.9% from 2022⁄2023 deals
- New development/expansion revenue +8.7%
- Combined NOI +82.7% for acquired and new/expanded facilities
FFO and Core FFO
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| FFO per Share | $4.24 | $3.94 | +7.6% |
| Core FFO per Share | $4.03 | $4.08 | -1.2% |
Ancillary Revenues
- Tenant reinsurance +9.8% from customer base growth
- 3rd party management +4.5 million from added properties
Liquidity and Capital Resources
As a REIT, Public Storage pays out most taxable income as dividends and retains only 10%. Operating cash flow is reinvested into the business.
Financial Flexibility
With strong credit ratings, Public Storage has significant access to debt and preferred equity financing. While costs have increased recently, the company’s strong credit profile provides continued capital access without materially impacting investment plans in the next 12 months.
Capital Sources
- $271.6 million in cash reserves at March 31, 2024
- ~$340 million in net proceeds from April 2024 debt issuances
- ~$450 million in expected 2024 retained cash flow
- $1.5 billion revolving credit facility
Uses of Cash
| Use | Amount | Timing |
|---|---|---|
| Development projects | $393.7 million | Next 18-24 months |
| Property acquisitions | $34.6 million | Under contract |
Public Storage has adequate resources to fund these near term cash requirements through operating cash flow, debt issuances, and credit facilities. Additional investments would require new sources of capital.
Debt Maturities
Public Storage has $9.1 billion of debt outstanding. Upcoming maturities include:
| Year | Principal | Interest | Total |
|---|---|---|---|
| Remainder of 2024 | $808 million | $172 million | $980 million |
| 2025 | $661 million | $222 million | $884 million |
| 2026 | $1.15 billion | $196 million | $1.35 billion |
Capital Expenditures
- $66 million spent in Q1 2024
- $180 million full year expectation
- Includes facility upgrades and solar panel installations
The company generates strong operating cash flow to meet capital needs and pays an annual common stock dividend of $10 per share.
