01—Abstract
Summary
Summary of the 10-K filed February 20, 2024. Cited figures are marked; the original filing is the authoritative source.
Public Storage (PSA) reported a year of slower operating momentum but continued earnings and cash-flow strength in 2023.
Net income allocable to common shareholders fell to $1.95 billiona, or $11.06 per diluted share, from $4.14 billion ($23.50) in 2022, which included a $2.1 billion gain on the sale of its PS Business Parks stake. Excluding that gain and related items, the underlying business grew: FFO rose 0.9% to $16.60 per diluted share and Core FFO rose 6.1% to $16.89. Self-storage net operating income grew 7.8%, driven by a 4.7% increase in same-store revenue on higher realized rents, partly offset by a 1.6% decline in same-store occupancy (to 93.3% weighted average).
Management expects same-store revenue in 2024 to be similar to 2023, citing softer new-customer demand at the start of the year. The balance sheet expanded significantly. The company acquired BREIT Simply Storage for $2.2 billionb in cash in September 2023, funded largely by $2.2 billion of senior notes, and total notes payable rose to $9.1 billion at a weighted average effective rate of about 3.1%.
Debt maturities are manageable but meaningful: roughly $810 millionc is due in 2024, including $700 million in U.S. dollar notes and EUR 100 million, which management plans to refinance. Liquidity is supported by $370 million in cash and an undrawn $1.5 billion revolver, and the company rates its senior notes A (S&P) and A2 (Moody's). The dividend was raised 50% to $12.00 per share annualized, and no shares were repurchased in 2023.
Key risks for investors include the rising cost of capital, rising property taxes (particularly in California, where Proposition 13 currently limits assessment increases), increased marketing spend tied to dependence on Google search, and the possibility of losing REIT status. The company also highlights exposure to its 35% stake in Shurgard, which carried a $1.7 billiond market value against a $390 million book value at year-end, and to euro-denominated debt that partially hedges it.
02—Key points
Key Highlights
- Total net income to common shareholders fell to $1.95B ($11.06/diluted share) from $4.14B ($23.50) in 2022, mainly due to the non-recurring 2022 gain on the PSB sale.
- Core FFO per diluted share rose 6.1% to $16.89; FFO per share rose 0.9% to $16.60.
- Same-store revenue grew 4.7% to $3.43B on a 6.3% increase in realized rent per occupied sq. ft., partly offset by occupancy falling 1.6% to 93.3%.
- Acquired $2.2B BREIT Simply Storage portfolio (127 facilities) in September 2023, funded with $2.2B of new senior notes; total facilities reached 3,044.
- Notes payable rose to $9.1B at a ~3.1% weighted average effective rate; $810M is due in 2024 and management plans to refinance it, with $1.5B revolver capacity and $370M of cash on hand.
- Quarterly common dividend raised 50% to $3.00/share ($12.00 annualized); no share repurchases were made in 2023.
- Management expects same-store revenue in 2024 to be similar to 2023 as new-customer demand softens and marketing and promotional spend increases.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2023filed February 20, 2024Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $4.52B$4.18B | +8.0% |
| Operating Expenses | $2.43B$2.18B | +11.4% |
| Interest Expense | $201.13M$136.32M | +47.5% |
| Net Income | $2.15B$4.35B | −50.6% |
| EPS (Basic) | $11.11$23.64 | −53.0% |
| EPS (Diluted) | $11.06$23.50 | −52.9% |
| Shares Outstanding (Basic) | 175.47M175.26M | +0.1% |
| Shares Outstanding (Diluted) | 176.14M176.28M | −0.1% |
05—Questions
Frequently Asked Questions
Why did net income fall so sharply in 2023 if the core business grew?
The 2022 results included a $2.1 billion one-time gain from selling the company's 41% stake in PS Business Parks. Without that gain, the core business grew: self-storage net operating income rose 7.8%, and Core FFO per share increased 6.1% to $16.89.
How much debt does Public Storage carry, and when does it come due?
Notes payable totaled about $9.1 billion at year-end 2023, at a weighted average effective rate of about 3.1%. About $810 million matures in 2024, including $700 million of U.S. dollar notes due April 23, 2024 and EUR 100 million due April 12, 2024, which management plans to refinance. Larger maturities follow in 2026 and 2028.
Is the dividend safe, given the 50% increase in 2023?
Management describes its policy as distributing taxable income as required to maintain REIT status. The 2023 Core FFO per share of $16.89 compared with $12.00 in annualized common dividends suggests coverage on an FFO basis, though management also reported that retained operating cash flow fell to about $480 million in 2023 from $1 billion in 2022, and expects about $450 million in 2024. Investors should weigh that reduced retained cash flow against the higher payout.
What are the biggest risks to future earnings?
Key risks include rising interest rates that raise financing costs and dampen acquisitions, softer demand and rising competition from new supply, increasing reliance on Google search for customer acquisition, rising property taxes (including California, where Proposition 13 protections could be reduced), and changes in REIT tax status. Currency swings also affect results through the euro-denominated notes and the Shurgard stake.
06—Continue