Public Storage (PSA), a leading real estate investment trust (REIT) operating self-storage facilities, reported second quarter 2011 FFO (funds from operations) of $1.39 per share, compared with $0.92 in the year-earlier quarter.
Funds from operations, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
Excluding several non-recurring items, FFO for second quarter 2011 was $1.43 per share compared with $1.27 in the year-ago quarter. Recurring FFO for second quarter 2011 exceeded the Zacks Consensus Estimate by 5 cents.
During the reported quarter, Public Storage recorded an increase in total revenues to $434.8 million from $407.6 million in the year-earlier quarter. Total revenues for the reported quarter were well ahead of the Zacks Consensus Estimate of $409 million.
Same-store revenues increased 4.0% year-over-year to $371.9 million during the quarter, while net operating income climbed 6.2% to $249.9 million. The increase in same-store revenues was primarily due to a 1.4% increase in average occupancy and a 2.2% rise in realized rent per occupied square foot.
Average occupancy in the same-store portfolio was 92.3% at quarter-end versus 91.0% in the prior-year period. Realized annual rent per occupied square foot increased from $12.31 in the year-earlier quarter to $12.58 in the reported quarter.
Public Storage currently has a 49% stake in Shurgard Europe, which has interests in 188 facilities (10 million net rentable square feet) located in 7 Western European countries. Public Storage is also the managing member of the JV that owns Shurgard Europe.
Public Storage acquired a self-storage facility in New York during the reported quarter. The property spanning 133,000 square feet of net rentable space was purchased for $18 million, including an assumption of debt to the tune of $10 million associated with the asset. Subsequent to the quarter-end, the company purchased 2 facilities (145,000 net rentable square feet) in California and Florida for approximately $23 million.
During the reported quarter, Public Storage acquired the Hughes Family’s ownership interests in 18 limited partnerships for $13.3 million. At the same time, the company acquired the partnership interests in 5 publicly held joint venture properties for $154.3 million.
During second quarter 2011, Public Storage also converted an erstwhile commercial property in Los Angeles, spanning 132,000 net rentable square feet, into a self-storage facility at a total cost of $5 million.
At quarter-end, Public Storage had $144.5 million of cash and cash equivalents. The company maintained its quarterly dividend at 95 cents per share. Funds from operations available for distribution (FAD) among common shareholders exceeded the regular common distribution by about $56.4 million during the quarter.
We maintain our Neutral rating on the stock, which presently has a Zacks #3 Rank, translating into a short-term Hold rating. We also have a Neutral recommendation and a Zacks #3 Rank for Sovran Self Storage Inc. (SSS), one of the competitors of Public Storage.
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