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Public Storage (PSA) Beats on Q1 FFO & Revenues, Revises View

Public Storage PSA reported first-quarter 2023 core funds from operations (FFO) per share of $4.08, which increased 11.8% year over year. The core FFO per share, excluding the contribution from the company’s equity investment in PS Business Parks, Inc., was also $4.08, rising 16.2% from the year-ago quarter’s tally. Both figures surpassed the Zacks Consensus Estimate by a penny and our estimate of $4.04.

Results reflect a better-than-anticipated top line, aided by an improvement in the realized annual rent per available square foot in the reported quarter. The company also benefited from its expansion efforts through acquisitions, developments and extensions. Furthermore, it revised its 2023 outlook.

Quarterly revenues of $1.09 billion outpaced the Zacks Consensus Estimate by 0.29%. It also beat our estimate of $1.08 billion. Moreover, revenues increased 12.4% year over year.

Behind the Headlines

Public Storage’s same-store revenues increased 9.8% year over year to $848.7 million in the first quarter, highlighting higher realized annual rent per occupied square foot, partially offset by a decline in occupancy. This storage REIT witnessed a 12.4% increase in realized annual rental income per occupied square foot to $22.65. However, the weighted-average square foot occupancy of 93.2% was down 2.4% year over year.

Cost of operations for the same store facilities increased 5.6% year over year, mainly due to a rise in property tax expense, repairs and maintenance expenses, marketing expenses and other direct property costs.

Consequently, PSA’s same-store net operating income (NOI) increased 11.2% to $641.5 million. Also, this REIT’s NOI growth from non-same-store facilities was $27.6 million, mainly due to the impact of facilities acquired in 2021 and 2022, and the fill-up of recently developed and expanded facilities.

The company achieved a 78.9% same-store direct NOI margin in the quarter, up from 78.6% in the prior-year quarter.

Portfolio Activity

In the first quarter, Public Storage acquired five self-storage facilities comprising 0.3 million net rentable square feet of area for $46.8 million. After Mar 31, 2023, the company acquired or was under contract to buy 12 self-storage facilities spanning 0.9 million net rentable square feet of space for $139 million.


It opened three newly developed facilities and completed several expansion projects with 0.4 million net rentable square feet costing $65.3 million.

As of Mar 31, 2023, PSA had several facilities in development (2.4 million net rentable square feet) with an estimated cost of $537.8 million and several expansion projects (2.4 million net rentable square feet) worth $488.2 million. It expects to incur the remaining $648.6 million of development costs related to these projects, mainly over the next 18 to 24 months.

Balance Sheet Position

Public Storage exited the first quarter of 2023 with $695.4 of cash and equivalents, down from $775.3 million as of Dec 31, 2022.

2023 Guidance Revised

The company revised its guidance for 2023.

It now projects 2023 core FFO per share in the range of $16.15-$16.80, revised from the prior-guided range of $16.10-$16.80. The Zacks Consensus Estimate for the same is currently pegged at $16.79, which lies within the guided range.

The company also revised its expectations for same-store revenue growth to 2.75-5% from the prior guidance of 2.5-5%. Same-store expenses are expected in the prior guided range of 4.75-6.75%.

Consequently, same-store NOI was revised to 1.5-5.1% from 1.2- 5.1% estimated previously.

PSA retained its guidance for acquisitions and development openings at $750 million and $375 million, respectively.

Dividend Update

On May 2, the company’s board announced a regular quarterly dividend of $3 per common share. The dividend will be paid out on Jun 29 to shareholders of record as of Jun 14, 2023.

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 and EPS Surprise
Public Storage Price, Consensus and EPS Surprise

Public Storage price-consensus-eps-surprise-chart | Public Storage Quote

Performance of Other REITs

Extra Space Storage Inc. EXR reported first-quarter 2023 core FFO per share of $2.02, which missed the Zacks Consensus Estimate of $2.05.

EXR’s quarterly revenues of $503.1 million also lagged the Zacks Consensus Estimate of $513.7 million.

Results reflected lower-than-anticipated revenues on lower occupancy levels. Higher operating expenses acted as a dampener in the quarter. The company also maintained its 2023 outlook.

SBA Communications Corporation SBAC reported first-quarter 2023 adjusted FFO per share of $3.13, outpacing the Zacks Consensus Estimate of $3.11. Moreover, the figure reflects a rise of 5.7% from the prior-year quarter.

SBAC’s site-leasing revenues improved year over year on healthy leasing activity amid elevated tower space demand. Moreover, it has continued to benefit from the addition of sites to its portfolio.

Digital Realty Trust DLR reported first-quarter 2023 core FFO per share of $1.66, beating the Zacks Consensus Estimate by a whisker. The figure, however, fell short of the year-ago quarter’s $1.67.

DLR experienced year-over-year growth in operating revenues during the quarter. However, rising rental property operating expenses acted as a dampener.

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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