Self-storage real estate investment trust (REIT) -
) - reported core FFO (funds from operations) of $1.80 per share,
missing the Zacks Consensus Estimate of $1.86 per share. Results
reflect higher expenses tied to snow removal and utilities in the
cold weather as well as increased property tax expense.
Nevertheless, aided by an increase in revenue, core FFO per share
registered a 9.1% rise from $1.65 reported in the prior quarter.
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After taking into account the impact of a number of non-core
items, reported FFO came in at $1.74 per share, representing an
uptick of 10.8% from the year-ago figure of $1.57 per share.
During the reported quarter, Public Storage recorded a 10.3%
year-over-year increase in total revenue to $519.6 million. The
revenue figure marginally exceeded the Zacks Consensus Estimate
of $514 million.
Quarter in Detail
Same-store revenues increased 5.1% year over year to $440.6
million during the quarter, while net operating income (NOI)
climbed 5.6% to $301.1 million. The increase in same-store
revenues was primarily due to a 4.3% rise in realized annual rent
per occupied square foot to $14.41 and a 90 basis points (bps)
year-over-year increase in weighted average square foot occupancy
to 93.2% as of Mar 31, 2014.
Furthermore, same-store revenues in Shurgard Europe moved up 1.3%
to $52.4 million. Same-store NOI for Shurgard Europe also climbed
1.3% from the prior-year quarter to $29.9 million. Though
realized annual rent per occupied square foot fell 2.9% to
$26.77, it was offset by a 660 bps rise in weighted average
square foot occupancy in the same-store portfolio to 86.1%.
Public Storage accomplished 2 new development facilities and one
expansion project (adding 335,000 net rentable square feet of
space) at a cost of around $40 million. As of Mar 31, 2014,
Public Storage had development and expansion projects in its
pipeline worth an estimated cost of $195 million ($38 million
already incurred through the end of the first quarter). These
projects would add approximately 1.9 million net rentable square
feet of storage space.
Public Storage exited first-quarter 2014 with around $101.1
million of cash and cash equivalents, up from $19.2 million of
cash and cash equivalents at year-end 2013.
Concurrent with its earnings release, Public Storage announced a
quarterly dividend of $1.40 per share. The dividend will be paid
on Jun 30, 2014 to shareholders of record as of Jun 13.
While the FFO estimate miss in the first quarter due to weather
associated expenses is not encouraging, we believe that Public
Storage has one of the strongest balance sheets in the sector
with adequate liquidity. Public Storage as a brand is widely
recognized in the self-storage industry and the company's
acquisition initiatives helped it carve a niche in the U.S and
European market. Backed by this, we believe the company is well
poised to maintain its growth curve going forward.
Public Storage also owns a 42% common equity interest in
PS Business Parks Inc.
), which owns and operates commercial space, primarily flex,
multi-tenant office and industrial space.
Public Storage currently has a Zacks Rank #3 (Hold). We now look
forward to the other REITs which are scheduled to report next
week. These include
Kimco Realty Corporation
). Both these stocks carry the same rank as Public Storage.
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.