On Jan 7, 2014, we reaffirmed our long-term recommendation on
real estate investment trust (REIT) operating self-storage
) - at Neutral. The decision reflects the company's strategic
acquisitions of storage facilities, solid third-quarter results
and dividend hike. However, the weak performance of its European
business restrains us from becoming extremely positive on the
The 'Public Storage' brand is widely recognized in the
self-storage industry. The company reported core FFO of $1.92 per
share and after taking into account the impact of a number of
non-core items, FFO came in at $2.00 per share, representing an
uptick of 15.6% from the year-ago quarter. Results also came in
ahead of the Zacks Consensus Estimate of $1.90 per share.
Results were aided by improved property operations leading to a
surge in net operating income (NOI) and acquisition of 56
self-storage facilities since Jan 2012. In addition, the company
announced a 12% hike in its quarterly dividend rate.
Public Storage's acquisition initiatives helped it carve a niche
in the U.S and the European market. The company also made
concerted efforts to extend its portfolio base with 88 facilities
in the recent period. These 88 facilities are located in
California, Colorado, Florida, Georgia, North Carolina, South
Carolina, Texas and Virginia.
In addition, it has one of the strongest balance sheets in the
sector with adequate liquidity and a major part of its portfolio
comprises unencumbered assets. Public Storage also owns a 43%
common equity interest in
PS Business Parks Inc.
), which owns and operates commercial space, primarily flex,
multi-tenant office and industrial space.
Yet, the performance of the company's European business is
currently discouraging. During the third quarter, same-store NOI
in Shurgard Europe fell 3.5% year over year owing to a fall in
weighted average square foot occupancy and a smaller decline in
realized annual rent per occupied square foot.
Considering the current macroeconomic environment, we do not
expect a robust turnaround in this unit's performance in the near
to medium term. Also, its significant construction pipeline
increases operational risks.
GETTY REALTY CP (GTY): Free Stock Analysis
NATL HEALTH INV (NHI): Free Stock Analysis
PUBLIC STORAGE (PSA): Free Stock Analysis
PS BUSINESS PKS (PSB): Free Stock Analysis
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Over the last 30 days, the Zacks Consensus Estimate for 2013
moved up a cent to $7.41 while that for 2014 moved north by 3
cents to $7.97 per share. Public Storage now carries a Zacks Rank
Other Stock to Consider
Investors interested in the REIT industry may consider stocks
Getty Realty Corp.
National Health Investors Inc.
). Both these stocks carry a Zacks Rank #1 (Strong Buy).
FFO, 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.