No bad stock

Public Storage
CEO : Mr. Joseph D. Russell Jr.

Quarterly earnings growth(YoY,%)

Joe Russell says,

Dividend Increase and Life Storage Acquisition Proposal

• Public Storage announced a 50% increase to its quarterly common dividend from $8 to $12 per share on an annualized basis.
• The company made a proposal to acquire Life Storage at a substantial premium, which was rejected by Life Storage in its response; however, Public Storage remains committed to pursuing the combination and sees significant potential for growth and value creation.

2022 Performance and Outlook for 2023

• Public Storage achieved record results in its same-store and non-same-store portfolios, with an 80% stabilized direct NOI margin and growth beyond 200 million owned square feet and $4 billion in total revenues.
• The company received the prestigious Great Place to Work award and achieved top-scoring U.S. self-storage REITs across sustainability benchmarks.
• Customer demand for self-storage remains strong, with move-in volume up more than 11% during the quarter and customer lengths of stay at record levels, driven by remote and hybrid work trends.
• New competitive supply is expected to be limited due to higher interest rates, cost pressures, difficult municipal processes, and concerns over the macro landscape.

Tom Boyle says,

2022 Capital Allocation and Development

• Public Storage invested $1 billion in acquisitions and developments in 2022, including the $190 million Neighborhood Florida portfolio in Q4.
• Transaction volumes were down with smaller deals compared to 2021, and the company expects this trend to continue this year with the forecast for $750 million of transaction volume.
• The development pipeline stands at approximately $1 billion as the company seeks to expand the portfolio with its in-house team.
• Public Storage is planning to deliver $375 million of new generation 5 properties in 2023 and more in 2024 to drive outperformance.

Financial Performance

• Public Storage reported core FFO of $4.16 for Q4 2022 and $15.92 for the year, representing 22.4% growth over Q4 2021.
• In the same-store pool of stabilized properties, revenue increased 13% compared to Q4 2021.
• Same-store direct costs of operations were up 5.3%, and net operating income for the same-store pool of stabilized properties was up 15.8% in the quarter.
• The lease-up and performance of recently acquired and developed facilities grew 51% compared to last year.

Outlook

• Public Storage introduced 2023 core FFO guidance with a $16.45 midpoint, representing 5.5% growth from 2022, excluding the contribution of PS Business Parks.
• The same-store revenue outlook ranges from a recessionary pathway to a softer landing for the economy.
• Occupancy is anticipated to be lower throughout the year and follow a typical seasonal pattern, and rate will be the driver of revenue growth.
• The expectations are for 5.75% same-store expense growth, driven primarily by property tax and marketing expense, leading to same-store NOI growth at the midpoint of 3.2%.
• The non-same-store acquisition and development properties are poised to be a strong contributor, growing from $448 million of NOI contribution in 2022 to $520 million at the midpoint.

Capital and Liquidity Position

• Public Storage has a well-laddered long-term debt profile with limited floating rate exposure and over $4 billion of preferred stock with perpetual fixed distributions.
• The leverage of 3.4 times net debt and preferred to EBITDA combined with nearly $800 million of cash on hand at quarter end puts the company in a strong position heading into 2023.

Q & A sessions,

Demand and Revenue Growth

• Move-in volumes up circa 10%, while move-in rates were down in mid-single digits, consistent with Q4 2022.
• 2023 is divided into two halves, with the first half facing tough comps and leading to some moderation in growth.
• Second half comps will be easier, but the macro uncertainty is significantly higher.
• Recessionary pathway leads to negative year-over-year revenue growth, while the higher end leads to positive growth and easier comps.

Existing Tenant Rate Increase Program

• The consumer continues to behave and perform within expectations.
• Cost to replace a tenant when they leave has increased, which will result in lower magnitude and frequency of rate increases.
• Top-of-funnel demand is good, with move-in volumes up double digits.

Operating Expenses

• Property taxes accounted for the largest operating expense line item.
• Property taxes are expected to grow at a rate of 5% to 6% due to past NOI growth in the sector.
• Marketing expenses are likely to increase due to a focus on driving top-of-funnel demand.
• Wage pressure, utilities, and inflationary pressures are smaller line items that the company is working to mitigate.

Outlook and Engines of Growth

• Operational improvements and enhancements are intact and benefit same-store NOI growth.
• Cost of capital has changed and may affect portfolio growth.
• Complementary growth, tenant reinsurance, third-party management, and investment in Shurgard are still in play and contribute to growth.