Public Storage Prices Public Offering of Senior Notes

Rhea-AI Summary

Public Storage (NYSE:PSA) announces a $1.0 billion senior notes offering by its subsidiary PSOC. The offering consists of two tranches with different interest rates and maturity dates. The proceeds will be used for debt repayment and general corporate purposes, including acquisitions.

Insights

Financial Analyst

The recent announcement by Public Storage regarding the pricing of a public offering of $1.0 billion in senior notes is a strategic financial move. The dual-tranche structure, with one part being floating rate notes and the other fixed rate, gives the company flexibility in managing interest rate risk. The floating rate notes, pegged to Compounded SOFR plus 70 basis points, suggest a keen awareness of the current interest rate environment and a strategy to minimize interest expenses in the short term. On the other hand, the fixed rate tranche provides long-term capital at a predetermined cost, which is beneficial for budgeting and financial planning.

The decision to use the proceeds to repay existing debt and for general corporate purposes, including acquisitions, indicates a proactive approach to capital management and growth. This offering could signal to investors that management is confident about the company's financial health and its ability to service debt while continuing to expand its operations. However, investors should be mindful of the potential dilution of equity and the impact of increased debt levels on the company's balance sheet and credit ratings.

Debt Market Analyst

From a debt market perspective, the issuance of senior notes by Public Storage Operating Company, guaranteed by Public Storage, represents a significant move in the REIT (Real Estate Investment Trust) sector. The issuance at par value for the floating rate notes and slightly below par for the fixed rate notes could be indicative of market confidence in the company's creditworthiness. The choice of Compounded SOFR as a benchmark for the floating rate notes aligns with the broader market transition away from LIBOR.

Investors in the debt market should consider the long duration of the fixed rate notes, maturing in 2053, which carry duration risk in a changing interest rate environment. The offering's closing date, set for April 16, 2024, provides a clear timeline for the market to absorb this new debt. The involvement of major financial institutions such as Citigroup and Morgan Stanley as joint book-running managers could enhance investor confidence in the offering.

Real Estate Investment Analyst

Public Storage's move to issue senior notes is noteworthy within the self-storage real estate sector, which has seen growing demand due to urbanization and downsizing trends. The company's intention to use the proceeds for acquisitions is indicative of an aggressive growth strategy, leveraging the current market conditions to expand its already substantial footprint in the self-storage industry. With interests in over 3,000 facilities in the US and a significant stake in Shurgard Self Storage in Europe, Public Storage is a major player with a diversified geographic presence.

Investors should consider the potential for increased market share and revenue growth from these acquisitions. However, it is also important to monitor the company's debt levels and the performance of newly acquired assets to ensure that the growth strategy does not adversely affect the company's long-term profitability and financial stability.

GLENDALE, Calif.--(BUSINESS WIRE)-- Public Storage (NYSE:PSA, the “Company”) announced today that the Company’s subsidiary, Public Storage Operating Company (“PSOC”), has priced a public offering of $1.0 billion aggregate principal amount of senior notes (the “Notes”). The Notes will be guaranteed by the Company.

The Notes will be issued in two tranches with an initial weighted average interest rate of approximately 5.8%. The first tranche of $700 million aggregate principal amount of floating rate senior notes due 2027 will bear interest at a rate equal to Compounded SOFR (as defined in the prospectus supplement relating to the offering), reset quarterly, plus 70 basis points, will be issued at 100.000% of par value and will mature on April 16, 2027 (the “floating rate notes”). We will pay interest on the floating rate notes quarterly on April 16, July 16, October 16 and January 16 of each year, commencing July 16, 2024. The second tranche of $300 million aggregate principal amount of fixed rate senior notes due 2053 will bear interest at an annual rate of 5.350%, will be issued at 98.249% of par value and will mature on August 1, 2053 (the “2053 notes”). We will pay interest on the 2053 notes semi-annually on February 1 and August 1 of each year, commencing August 1, 2024. The 2053 notes constitute a further issuance of, and form a single series with, PSOC’s previously issued 5.350% Senior Notes due 2053, $600 million of which are currently outstanding.

The offering is expected to close on April 16, 2024, subject to the satisfaction of customary closing conditions. The Company expects to use the net proceeds to repay our outstanding $700 million in aggregate principal amount of our floating rate senior notes due 2024 and for general corporate purposes, including acquisitions of self-storage facilities and repayment of other debt.

Citigroup Global Markets Inc. and Morgan Stanley & Co. LLC acted as joint book-running managers of the offering. This announcement shall not constitute an offer to sell or a solicitation of an offer to buy these securities nor shall there be any offer or sale of these securities in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful. The offering is being made pursuant to an effective shelf registration statement filed with the Securities and Exchange Commission (the “SEC”) and only by means of a prospectus and prospectus supplement. Investors may obtain these documents for free by visiting EDGAR on the SEC’s website at www.sec.gov. Alternatively, copies of the prospectus and prospectus supplement may be obtained by contacting Citigroup Global Markets Inc. toll-free at 1-800-831-9146 or Morgan Stanley & Co. LLC toll-free at 1-866-718-1649.

Company Information

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 December 31, 2023, we had: (i) interests in 3,044 self-storage facilities located in 40 states with approximately 218 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 275 self-storage facilities located in seven Western European nations with approximately 15 million net rentable square feet operated under the Shurgard® brand. Our headquarters are located in Glendale, California.

Forward-Looking Statements

When used within this press release, the words “expects,” “believes,” “anticipates,” “plans,” “would,” “should,” “may,” “estimates” and similar expressions are intended to identify “forward-looking statements,” including but not limited to, statements about the completion and timing of the proposed offering of securities by the Company and the intended use of net proceeds of such offering. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results to be materially different from those expressed or implied in the forward-looking statements. Such factors include market conditions and the demand for the Company’s securities and risks detailed in the Company’s prospectus and prospectus supplement filed with the SEC in connection with this offering and in the Company’s SEC reports, including quarterly reports on Form 10-Q, current reports on Form 8-K and annual reports on Form 10-K. We undertake no obligation to publicly update or revise forward-looking statements which may be made to reflect events or circumstances after the date of this release or to reflect the occurrence of unanticipated events, except as required by law.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240409006030/en/

Ryan Burke

(818) 244-8080, Ext. 1141

Source: Public Storage

FAQ

What is the purpose of Public Storage's (PSA) $1.0 billion senior notes offering?

The proceeds from the offering will be used for debt repayment and general corporate purposes, including acquisitions.

What are the two tranches in the senior notes offering by Public Storage (PSA)?

The offering consists of a $700 million floating rate senior notes tranche due 2027 and a $300 million fixed rate senior notes tranche due 2053.

Who are the joint book-running managers of Public Storage's (PSA) offering?

Citigroup Global Markets Inc. and Morgan Stanley & Co. acted as joint book-running managers of the offering.

Where can investors obtain the prospectus and prospectus supplement for Public Storage's (PSA) offering?

Investors may obtain the documents for free by visiting EDGAR on the SEC's website at www.sec.gov or by contacting Citigroup Global Markets Inc. or Morgan Stanley & Co.