10-QPeriod: Q1 FY2016

Public Storage Quarterly Report for Q1 Ended Mar 31, 2016

Filed May 6, 2016For Securities:PSAPSA-PRPSA-PFPSA-PGPSA-PHPSA-PIPSA-PJPSA-PMPSA-PNPSA-POPSA-PPPSA-PQPSA-PSPSA-PKPSA-PL

Summary

Public Storage (PSA) reported strong performance for the first quarter of 2016, with net income attributable to common shareholders increasing by 13.5% to $241.3 million, or $1.39 per diluted share, compared to $212.6 million, or $1.23 per diluted share, in the prior year period. This growth was primarily driven by a significant 12.3% increase in total net operating income from self-storage operations, reaching $414.7 million. The company's "Same Store Facilities" demonstrated robust growth, with revenues up 6.5% and net operating income increasing by 10.4%. This was fueled by a 6.1% rise in realized annual rental income per occupied square foot, achieved through annual rent increases to existing tenants and higher move-in rates. The "Non Same Store Facilities" also showed substantial improvement, with net operating income surging 29.0%, reflecting the ongoing stabilization of recently acquired and developed properties. Looking ahead, Public Storage is actively pursuing growth through both acquisitions and development. The company acquired 12 self-storage facilities for $98.1 million in the quarter and has a development pipeline poised to add 4.6 million net rentable square feet. Despite the positive operational performance, management highlighted potential earnings dilution in the short term due to ongoing development activities, a key factor for investors to consider.

Financial Highlights

35 data points
Beta

Revenue

$611.79M

71.7% Gross Margin

Net Income

$317.35M

51.9% Net Margin

EPS (Diluted)

$1.39

Total Assets

$10.06B

Cash & Equivalents

$305.70M

Free Cash Flow

$440.98M

Financial Statements
Beta
Revenue$611.79M
Cost of Revenue$173.29M
Gross Profit$438.50M
Operating Expenses$301.46M
Operating Income$310.32M
Interest Expense$711K
Net Income$317.35M
EPS (Basic)$1.40
EPS (Diluted)$1.39
Shares Outstanding (Basic)172.98M
Shares Outstanding (Diluted)173.85M

Key Highlights

  • 1Net income increased by 13.5% to $241.3 million ($1.39 per diluted share) for Q1 2016, up from $212.6 million ($1.23 per diluted share) in Q1 2015.
  • 2Total net operating income from self-storage operations grew by 12.3% to $414.7 million.
  • 3Same Store Facilities revenue increased by 6.5%, driven by a 6.1% rise in realized annual rental income per occupied square foot.
  • 4Non Same Store Facilities net operating income surged by 29.0%, indicating successful stabilization of newer properties.
  • 5The company acquired 12 self-storage facilities for $98.1 million in Q1 2016 and has a significant development pipeline of 4.6 million net rentable square feet underway.
  • 6Funds From Operations (FFO) per diluted common share increased by 9.9% to $2.10, and Core FFO per diluted common share increased by 13.9% to $2.21.
  • 7The company announced a regular common quarterly dividend of $1.80 per common share, an increase of $0.10 from the previous quarter.

Frequently Asked Questions

The primary driver of earnings growth was a significant increase in self-storage net operating income, up 12.3% year-over-year. This was bolstered by strong performance in both 'Same Store Facilities' (up 10.4% in NOI) and 'Non Same Store Facilities' (up 29.0% in NOI).

Public Storage is expanding through both acquisitions and development. In Q1 2016, they acquired 12 facilities for $98.1 million. They also have a substantial development pipeline with projects underway that will add approximately 4.6 million net rentable square feet.

The company reported a 6.1% increase in realized annual rental income per occupied square foot, driven by annual rent increases for existing tenants and higher move-in rates. Occupancy for 'Same Store Facilities' remained stable at approximately 93.6% on a weighted average basis, near historical limits.

Management noted that ongoing development activities, which involve a 3-4 year fill-up period for new spaces, could lead to increased earnings dilution in the short term as these new properties stabilize. This is a common characteristic of active development for self-storage REITs.