Public Storage (PSA)

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Public Storage (PSA)

Q4 2012 Earnings Call

February 22, 2013 1:00 pm ET

Executives

Clemente Teng - Vice President of Investor Services

Edward John Reyes - Chief Financial Officer, Principal Accounting Officer and Senior Vice President

Ronald L. Havner - Chairman, Chief Executive Officer and President

Analysts

Christy McElroy - UBS Investment Bank, Research Division

Todd M. Thomas - KeyBanc Capital Markets Inc., Research Division

Gaurav Mehta - Cantor Fitzgerald & Co., Research Division

Michael Knott - Green Street Advisors, Inc., Research Division

Eric Wolfe - Citigroup Inc, Research Division

Michael J. Salinsky - RBC Capital Markets, LLC, Research Division

Michael W. Mueller - JP Morgan Chase & Co, Research Division

Omotayo T. Okusanya - Jefferies & Company, Inc., Research Division

David Harris - Imperial Capital, LLC, Research Division

Presentation

Operator

Good afternoon. My name is Jackie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Public Storage Fourth Quarter 2012 Earnings Call. [Operator Instructions] I would now like to turn the call over to Clem Teng. Mr. Teng, please go ahead.

Clemente Teng

Thank you, Jackie. Good morning, and thank you for joining us this morning for our fourth quarter earnings call. Here with me today are Ron Havner and John Reyes.

All statements other than statements of historical facts included in this conference call are forward-looking statements, subject to a number of risks and uncertainties that could cause actual results to differ materially from those projected in these statements. These risks and other factors that could adversely affect our business and future results are described in today's earnings press release and in our reports filed with the SEC.

All forward-looking statements speak only as of today, February 22, 2013, and we assume no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. A reconciliation to GAAP or the non-GAAP financial measures we are providing on this call is included in our earnings press release. You can find them, our press release, SEC reports and audio webcast replay of this conference call on our website at www.publicstorage.com.

I'll turn the call over to John Reyes.

Edward John Reyes

Thank you, Clem. Our core FFO per share was $1.86 compared to $1.66 last year, a 12% increase. This increase was driven by a 9% growth in our same-store NOI, growth of our non-same-store properties and lower preferred stock dividends. With respect to our capital activity for 2012, we issued a total of $1.7 billion of new preferred securities, with an average coupon rate of 5.7%, and redeemed $2 billion with an average rate of 6.6%. Last month, we issued $500 million of preferred stock at 5.2%, the lowest rate ever. A portion of the net proceeds from this issuance was used to pay off the outstanding debt under our revolving credit facility.

We increased our quarterly dividend to $1.25 per share, representing an increase of 14%. Since 2007, our dividend has more than doubled. Our consistent long-term dividend policy has been to distribute only our taxable income.

With that, I will now turn it over to Ron.

Ronald L. Havner

Thank you, John. The fourth quarter benefited from solid demand, resulting in record high occupancies and higher realized rents. Customer acquisition cost continued to decline, while customer move-in volumes increased and move-outs declined. At the end of January 2013, occupancy and in-place rents were higher than last year. In Europe, same-store NOI improved by 1% despite a difficult operating environment. Of note, in the U.K. market, Q4 revenue declined by 8.6% compared to last year and compared to a 4% growth in Q3 as we reduced rental rates to compensate for the introduction of the value-added tax in October. In Q4, we acquired 10 facilities for approximately $82 million. We're adding about 910,000 net rentable square feet to the portfolio.

With that, operator, let's open up for questions.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from the line of Christy McElroy with UBS.

Christy McElroy - UBS Investment Bank, Research Division

With regard to the reduced seasonal impact on occupancy that you saw in Q4, is the 200 basis point occupancy gap that you had at year end something that you'll try to sustain through Q2 and Q3? Or is it really more a function of your efforts to sort of smooth out the occupancy cycle throughout the year?

Edward John Reyes

Christy, I'd say it's the latter. We're trying to smooth out the seasonality of our occupancies, and so you saw us -- and we talked about this on our last conference call that we were going to try to do that during the fourth quarter, which we did. We gapped up versus last year by the 200 basis points that you mentioned. We should continue that into the first quarter. But by the time we get into the summer months, it's going to be probably more difficult to keep that gap just because the year-over-year comps are going to be much tougher for us.

Christy McElroy - UBS Investment Bank, Research Division

Okay. And then just to follow up on that, in regards to the ultimate goal being to maximize REVPAF growth, given the different levers that you have, would you expect that you could see a similar level of REVPAF growth in 2013 versus the 5% you saw in 2012?

Ronald L. Havner

Christy, that kind of borders on guidance.

Christy McElroy - UBS Investment Bank, Research Division

A little.

Ronald L. Havner

Yes.

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