10-QPeriod: Q2 FY2020

Public Storage Quarterly Report for Q2 Ended Jun 30, 2020

Filed August 5, 2020For Securities:PSAPSA-PRPSA-PFPSA-PGPSA-PHPSA-PIPSA-PJPSA-PMPSA-PNPSA-POPSA-PPPSA-PQPSA-PSPSA-PKPSA-PL

Summary

Public Storage (PSA) reported its financial results for the second quarter and first half of 2020. The company experienced a decline in net income allocable to common shareholders, primarily due to decreased self-storage net operating income, foreign currency exchange losses, and increased depreciation and amortization expenses. Revenues from same-store facilities decreased by 3.0% for the quarter and 0.9% for the half-year, driven by lower rental income and a significant reduction in late fees and administrative charges. The company's operating costs, particularly for same-store facilities, saw an increase due to higher property manager payroll and marketing expenses. Despite these challenges, Public Storage maintained strong occupancy levels and demonstrated resilience in managing bad debt, partly attributed to government stimulus measures. The company's liquidity remains strong, with substantial cash reserves and available borrowing capacity, positioning it to navigate the ongoing economic uncertainties and pursue strategic growth initiatives. The COVID-19 pandemic continued to impact operations, leading to curtailed rate increases, reduced fee collections, and increased operating expenses. However, self-storage facilities were classified as essential businesses, allowing them to remain operational. The company is actively monitoring the situation and has implemented safety measures for employees and customers. Looking ahead, Public Storage anticipates continued revenue pressure in the latter half of 2020, with a focus on cautiously reinstituting modest tenant rate increases and managing acquisition and development pipelines amidst ongoing economic uncertainty.

Financial Highlights

33 data points
Beta

Revenue

$712.94M

Net Income

$314.92M

44.2% Net Margin

EPS (Diluted)

$1.41

Total Assets

$12.36B

Cash & Equivalents

$1.27B

Free Cash Flow

$539.12M

Financial Statements
Beta
Revenue$712.94M
Operating Expenses$401.16M
Interest Expense$14.14M
Net Income$314.92M
EPS (Basic)$1.41
EPS (Diluted)$1.41
Shares Outstanding (Basic)174.49M
Shares Outstanding (Diluted)174.57M

Key Highlights

  • 1Net income allocable to common shareholders decreased by 19.7% to $246.1 million ($1.41/share) for the quarter and by 8.0% to $559.3 million ($3.20/share) for the six months ended June 30, 2020, compared to the prior year periods.
  • 2Same-store facility revenues decreased by 3.0% year-over-year for the three months ended June 30, 2020, and by 0.9% for the six months ended June 30, 2020, primarily due to reduced rental income and late fees.
  • 3Operating costs for same-store facilities increased by 6.7% for the quarter and 5.3% for the six months, largely driven by higher property manager payroll and marketing expenses.
  • 4The company reported strong cash and equivalents of $1.27 billion as of June 30, 2020, indicating robust liquidity.
  • 5Public Storage issued new preferred shares totaling $565.0 million in June 2020 and redeemed Series V Preferred Shares totaling $495.0 million in July 2020.
  • 6The company experienced foreign currency exchange losses of $19.3 million in the quarter and $10.4 million in the six months due to fluctuations in the Euro-denominated debt.
  • 7Despite revenue pressures, occupancy levels remained strong, with weighted average occupancy at 94.2% for the same-store facilities in the second quarter of 2020.

Frequently Asked Questions

The COVID-19 pandemic negatively impacted Public Storage's operations by curtailing rate increases on existing tenants, reducing late fee and administrative charge collections, and increasing operating expenses, particularly property manager payroll. However, self-storage facilities were classified as essential businesses and remained open, which helped mitigate some of the adverse effects. The company also implemented safety measures and a touchless online leasing platform.

The company anticipates that total revenue in the last half of 2020 will likely decrease on a year-over-year basis at a rate higher than the decrease seen in the second quarter. This outlook is based on factors including the recent reduction in contract rent per occupied square foot, potential persistence of decreases in late charges and administrative fees, and general economic uncertainty. However, there are some encouraging signs such as stabilizing occupancy levels and moderating decreases in move-in rental rates.

Public Storage maintained strong liquidity with approximately $1.3 billion in cash and $480.7 million in available borrowing capacity on its credit facility as of June 30, 2020. The company expects its capital resources to exceed its identified capital needs for the next year. Capital needs include property acquisitions, preferred share redemptions, and development pipeline spending. The company has access to various capital sources including debt and preferred equity.

Fluctuations in the exchange rate between the U.S. Dollar and the Euro resulted in foreign currency exchange losses of $19.3 million for the three months ended June 30, 2020, and $10.4 million for the six months ended June 30, 2020. These losses were primarily related to the company's Euro-denominated unsecured notes payable.