Public Storage (NYSE:PSA) announced today operating results for the three and six months ended June 30, 2024.

“The Public Storage team is executing well on our strategic initiatives, including enhancing our operating efficiencies, achieving industry-leading margins, and delivering record property development volumes,” said Joe Russell, President and Chief Executive Officer. “Operating performance met or exceeded our expectations during the quarter except for customer move-in rents, which were impacted by industry-wide competition. We are adjusting our outlook for 2024 to reflect market move-in rent dynamics while remaining very encouraged by signs of stabilization across our portfolio. Our recent repurchase of $200 million of Public Storage common shares reflects our strong confidence in the company’s near, medium, and long-term outlooks.”

Highlights for the Three Months Ended June 30, 2024

• Reported net income allocable to common shareholders of $2.66 per diluted share.
• Reported core FFO allocable to common shareholders (“Core FFO”) of $4.23 per diluted share.
• Achieved 79.3% Same Store (as defined below) direct net operating income margin.
• Repurchased $200 million of our common shares under our previously announced share repurchase program on the open market at an average price of $275 per share.
• Acquired two self-storage facilities with 0.1 million net rentable square feet for $22.0 million. Subsequent to June 30, 2024, we acquired or were under contract to acquire three self-storage facilities with 0.2 million net rentable square feet, for $24.2 million.
• Opened two newly developed facilities and completed various expansion projects, which together added 0.4 million net rentable square feet at a cost of $84.9 million. At June 30, 2024, we had various facilities in development and expansion expected to add 3.8 million net rentable square feet at an estimated cost of $738.7 million.
• Issued €150 million of senior notes to institutional investors, bearing interest at a fixed rate of 4.080% and maturing on April 11, 2039.
• Completed a public offering of $1.0 billion aggregate principal amount of senior notes, including $700 million aggregate principal amount of floating rate senior notes bearing interest at a rate of Compounded SOFR + 0.70% (reset quarterly) maturing on April 16, 2027 and an additional $300 million aggregate principal amount of our senior notes bearing interest at a fixed annual rate of 5.350% maturing on August 1, 2053.

Operating Results for the Three Months Ended June 30, 2024

For the three months ended June 30, 2024, net income allocable to our common shareholders was $468.4 million or $2.66 per diluted common share, compared to $528.3 million or $3.00 per diluted common share for the same period in 2023, representing a decrease of $59.9 million or $0.34 per diluted common share. The decrease is due primarily to (i) a $61.2 million increase in depreciation and amortization expense and (ii) a $35.2 million increase in interest expense, partially offset by (iii) a $27.8 million increase in self-storage net operating income and (iv) a $13.5 million increase in foreign currency exchange gains primarily associated with our Euro denominated notes payable.

The $27.8 million increase in self-storage net operating income in the three months ended June 30, 2024 as compared to the same period in 2023 is a result of a $39.5 million increase attributable to our Non-Same Store Facilities (as defined below), partially offset by an $11.7 million decrease attributable to our Same Store Facilities. Revenues for the Same Store Facilities decreased 1.0% or $9.8 million in the three months ended June 30, 2024 as compared to the same period in 2023, due primarily to lower realized annual rent per occupied square foot and a decline in occupancy. Cost of operations for the Same Store Facilities increased by 0.9% or $1.9 million in the three months ended June 30, 2024 as compared to the same period in 2023, due primarily to increased property tax expense partially offset by decreased on-site property manager payroll. The increase in net operating income of $39.5 million for the Non-Same Store Facilities is due primarily to the impact of facilities acquired in 2023 and the fill-up of recently developed and expanded facilities.

Operating Results for the Six Months Ended June 30, 2024

For the six months ended June 30, 2024, net income allocable to our common shareholders was $927.6 million or $5.26 per diluted common share, compared to $995.8 million or $5.65 per diluted common share for the same period in 2023, representing a decrease of $68.2 million or $0.39 per diluted common share. The decrease is due primarily to (i) a $124.8 million increase in depreciation and amortization expense and (ii) a $66.8 million increase in interest expense, partially offset by (iii) a $77.9 million increase in foreign currency exchange gains primarily associated with our Euro denominated notes payable and (iv) a $52.9 million increase in self-storage net operating income.

The $52.9 million increase in self-storage net operating income in the six months ended June 30, 2024 as compared to the same period in 2023 is a result of a $74.9 million increase attributable to our Non-Same Store Facilities, partially offset by a $22.0 million decrease attributable to our Same Store Facilities. Revenues for the Same Store Facilities decreased 0.5% or $9.2 million in the six months ended June 30, 2024 as compared to the same period in 2023, due primarily to a decline in occupancy. Cost of operations for the Same Store Facilities increased by 2.9% or $12.8 million in the six months ended June 30, 2024 as compared to the same period in 2023, due primarily to increased property tax expense and marketing expense partially offset by decreased on-site property manager payroll and utilities. The increase in net operating income of $74.9 million for the Non-Same Store Facilities is due primarily to the impact of facilities acquired in 2023 and the fill-up of recently developed and expanded facilities.

Funds from Operations

Funds from Operations (“FFO”) and FFO per share are non-GAAP measures defined by Nareit. We believe that FFO and FFO per share are useful to REIT investors and analysts in measuring our performance because Nareit’s definition of FFO excludes items included in net income that do not relate to or are not indicative of our operating and financial performance. FFO represents net income before real estate-related depreciation and amortization, which is excluded because it is based upon historical costs and assumes that building values diminish ratably over time, while we believe that real estate values fluctuate due to market conditions. FFO also excludes gains or losses on sale of real estate assets and real estate impairment charges, which are also based upon historical costs and are impacted by historical depreciation. FFO and FFO per share are not a substitute for net income or earnings per share. FFO is not a substitute for net cash flow in evaluating our liquidity or ability to pay dividends, because it excludes investing and financing activities presented on our consolidated statements of cash flows. In addition, other REITs may compute these measures differently, so comparisons among REITs may not be helpful.

For the three months ended June 30, 2024, FFO was $4.30 per diluted common share as compared to $4.29 for the same period in 2023, representing an increase of 0.2%.

For the six months ended June 30, 2024, FFO was $8.54 per diluted common share, as compared to $8.24 in the same period in 2023, representing an increase of 3.6%.

We also present “Core FFO” and “Core FFO per share,” non-GAAP measures that represent FFO and FFO per share excluding the impact of (i) foreign currency exchange gains and losses, (ii) charges related to the redemption of preferred securities, and (iii) certain other non-cash and/or nonrecurring income or expense items primarily representing, with respect to the periods presented below, the impact of loss contingencies and resolutions, due diligence costs incurred in pursuit of strategic transactions, unrealized gain on private equity investments, amortization of acquired non real estate-related intangibles, and our equity share of deferred tax benefits of a change in tax status and unrealized gain on derivatives from our equity investee. We review Core FFO and Core FFO per share to evaluate our ongoing operating performance, and we believe they are used by investors and REIT analysts in a similar manner. However, Core FFO and Core FFO per share are not substitutes for net income and net income per share. Because other REITs may not compute Core FFO or Core FFO per share in the same manner as we do, may not use the same terminology, or may not present such measures, Core FFO and Core FFO per share may not be comparable among REITs.

The following table reconciles net income to FFO and Core FFO and reconciles diluted earnings per share to FFO per share and Core FFO per share (unaudited):

Property Operations – Same Store Facilities

The Same Store Facilities consist of facilities that have been owned and operated on a stabilized level of occupancy, revenues, and cost of operations since January 1, 2022. Our Same Store Facilities did not change from March 31, 2024. The composition of our Same Store Facilities allows us to more effectively evaluate the ongoing performance of our self-storage portfolio in 2022, 2023, and 2024 and exclude the impact of fill-up of unstabilized facilities, which can significantly affect operating trends. We believe the Same Store Facilities information is used by investors and analysts in a similar manner. However, because other REITs may not compute Same Store Facilities in the same manner as we do, may not use the same terminology, or may not present such a measure, Same Store Facilities may not be comparable among REITs. The following table summarizes the historical operating results (for all periods presented) of these 2,507 facilities (170.0 million net rentable square feet) that represent approximately 78% of the aggregate net rentable square feet of our U.S. consolidated self-storage portfolio at June 30, 2024 (unaudited):

Property Operations – Non-Same Store Facilities

In addition to the 2,507 Same Store Facilities, we have 542 facilities that were not stabilized with respect to occupancies, revenues, or cost of operations since January 1, 2022 or that we did not own as of January 1, 2022, including 240 facilities that were acquired, 42 newly developed facilities, 84 facilities that have been expanded or are targeted for expansion, and 176 facilities that are unstabilized because they are undergoing fill-up or were damaged in casualty events (collectively, the “Non-Same Store Facilities”). Operating data, metrics, and further commentary with respect to these facilities, including detail by vintage, are included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under “Analysis of Net Income – Self-Storage Operations” in our June 30, 2024 Form 10-Q.

Investing and Capital Activities

During the three and six months ended June 30, 2024, we acquired two self-storage facilities (one each in Texas and Virginia) with 0.1 million net rentable square feet for $22.0 million.

Subsequent to June 30, 2024, we acquired or were under contract to acquire three self-storage facilities across three states with 0.2 million net rentable square feet, for $24.2 million.

During 2023, we acquired BREIT Simply Storage LLC, a self-storage company that owned and operated 127 self-storage facilities (9.4 million square feet) and managed 25 self-storage facilities (1.8 million square feet) for third parties, for a purchase price of $2.2 billion in cash. The Simply portfolio facilities generated self-storage revenues of $76.0 million, NOI of $52.0 million (including Direct NOI of $54.6 million), and average square footage occupancy of 86.7% for the six months ended June 30, 2024.

During the three months ended June 30, 2024, we opened two newly developed facilities and completed various expansion projects, which together contributed 0.4 million net rentable square feet (0.2 million in California and 0.1 million each in Maryland and Texas) at a cost of $84.9 million. During the six months ended June 30, 2024, we opened three newly developed facilities and various expansion projects, which together contributed 0.7 million net rentable square feet (0.4 million in California and 0.1 million each in Florida, Maryland, and Texas) at a cost of $119.9 million. At June 30, 2024, we had various facilities in development (expected to contribute 2.2 million net rentable square feet) estimated to cost $419.5 million and various expansion projects (expected to contribute 1.6 million net rentable square feet) estimated to cost $319.2 million. Our aggregate 3.8 million net rentable square foot pipeline of development and expansion facilities includes 1.0 million in Florida, 0.9 million in California, 0.6 million in Texas, 0.3 million in Nevada, 0.2 million each in Arizona and New York, and 0.1 million each in Colorado, Georgia, Hawaii, Maryland, South Carolina, and Virginia. The remaining $358.0 million of development costs for these projects are expected to be incurred primarily in the next 18 to 24 months.

On April 11, 2024, Public Storage Operating Company (“PSOC”) issued €150 million of senior notes to institutional investors, bearing interest at a fixed rate of 4.080% and maturing on April 11, 2039. The senior notes are guaranteed by Public Storage. We received $162.5 million of net proceeds from the issuance after converting the Euros to U.S. Dollars. On April 11, 2024, we repaid PSOC’s outstanding €100 million aggregate principal amount 1.54% senior notes due April 12, 2024 to the same institutional investors for $108.4 million.

On April 16, 2024, PSOC completed a public offering of $1.0 billion aggregate principal amount of senior notes, including $700 million aggregate principal amount of floating rate senior notes bearing interest at a rate of Compounded SOFR + 0.70% (reset quarterly) maturing on April 16, 2027 and $300 million aggregate principal amount of senior notes bearing interest at a fixed annual rate of 5.350% maturing on August 1, 2053. The 2053 notes issued at a discount of $5.3 million constitute a further issuance of, and form a single series with, our outstanding 5.350% senior notes due 2053 issued on July 26, 2023 in the aggregate principal amount of $600 million. These senior notes are guaranteed by Public Storage. We received $988.5 million of net proceeds from the offering. On April 23, 2024, we repaid PSOC’s outstanding $700 million aggregate principal amount of floating rate senior notes at maturity due April 23, 2024.

During the three and six months ended June 30, 2024, we repurchased 726,865 of our common shares under our previously announced share repurchase program on the open market for a total cost of $200.0 million.

Outlook for the Year Ending December 31, 2024

Set forth below are our current expectations and prior expectations as of April 30, 2024 with respect to full year 2024 Core FFO per share and certain underlying assumptions. In reliance on the exception provided by applicable SEC rules, we do not provide guidance for GAAP net income per share, the most comparable GAAP financial measure, or a reconciliation of 2024 Core FFO per share to GAAP net income per share because we are unable to reasonably predict the following items which are included in GAAP net income: (i) gains or losses on sales of real estate investments, (ii) foreign currency exchange gains and losses, (iii) charges related to the redemption of preferred securities, and (iv) certain other significant non-cash and/or nonrecurring income or expense items. The actual amounts for any and all of these items could significantly impact our 2024 GAAP net income and, as disclosed in our historical financial results, have significantly impacted GAAP net income in prior periods.

Second Quarter Conference Call

A conference call is scheduled for July 31, 2024 at 9:00 a.m. (PT) to discuss the second quarter earnings results. The domestic dial-in number is (877) 407-9039, and the international dial-in number is (201) 689-8470. A simultaneous audio webcast may be accessed by using the link at www.publicstorage.com under “About Us, Investor Relations, News and Events, Event Calendar.” A replay of the conference call may be accessed through August 14, 2024 by calling (844) 512-2921 (domestic), (412) 317-6671 (international) (access ID number for either domestic or international is 13747670) or by using the link at www.publicstorage.com under “About Us, Investor Relations, News and Events, Event Calendar.”

About Public Storage

Public Storage, a member of the S&P 500 and FT Global 500, is a REIT that primarily acquires, develops, owns, and operates self-storage facilities. At June 30, 2024, we had: (i) interests in 3,049 self-storage facilities located in 40 states with approximately 219 million net rentable square feet in the United States and (ii) a 35% common equity interest in Shurgard Self Storage Limited (Euronext Brussels:SHUR), which owned 281 self-storage facilities located in seven Western European nations with approximately 16 million net rentable square feet operated under the Shurgard® brand. Our headquarters are located in Glendale, California.

This press release, our Form 10-Q for the second quarter of 2024, a financial supplement, and additional information about Public Storage are available on our website, www.publicstorage.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements relating to our 2024 outlook and all underlying assumptions; our expected acquisition, disposition, development, and redevelopment activity; supply and demand for our self-storage facilities; information relating to operating trends in our markets; expectations regarding operating expenses, including property tax changes; expectations regarding the impacts from inflation and changes in macroeconomic conditions; our strategic priorities; expectations with respect to financing activities, rental rates, cap rates, and yields; leasing expectations; our credit ratings; and all other statements other than statements of historical fact. Such statements are based on management’s beliefs and assumptions made based on information currently available to management and may be identified by the use of the words “outlook,” “guidance,” “expects,” “believes,” “anticipates,” “should,” “estimates,” and similar expressions. These forward-looking statements involve known and unknown risks and uncertainties, which may cause our actual results and performance to be materially different from those expressed or implied in the forward-looking statements. Risks and uncertainties that may impact future results and performance include, but are not limited to those described in Part 1, Item 1A, “Risk Factors” in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on February 20, 2024 and in our other filings with the SEC. These include changes in demand for our facilities; changes in macroeconomic conditions; changes in national self-storage facility development activity; impacts of natural disasters; adverse changes in laws and regulations including governing property tax, evictions, rental rates, minimum wage levels, and insurance; adverse economic effects from public health emergencies, international military conflicts, or similar events impacting public health and/or economic activity; increases in the costs of our primary customer acquisition channels; adverse impacts to us and our customers from high interest rates, inflation, unfavorable foreign currency rate fluctuations, or changes in federal or state tax laws related to the taxation of REITs; security breaches, including ransomware; or a failure of our networks, systems, or technology. These forward-looking statements speak only as of the date of this press release or as of the dates indicated in the statements. All of our forward-looking statements, including those in this press release, are qualified in their entirety by this cautionary statement. We expressly disclaim any obligation to update publicly or otherwise revise any forward-looking statements, whether because of new information, new estimates, or other factors, events, or circumstances after the date of these forward-looking statements, except when expressly required by law. Given these risks and uncertainties, you should not rely on any forward-looking statements in this press release, or which management may make orally or in writing from time to time, neither as predictions of future events nor guarantees of future performance.

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