Public Storage Reports Results for the Fourth Quarter and Year Ended December 31, 2020

Rhea-AI Summary

Public Storage (NYSE: PSA) announced its fourth quarter and full-year operating results for 2020. Net income for Q4 was $292.2 million, or $1.67 per diluted share, down from $327.3 million in 2019. Full-year net income was $1,098.3 million, or $6.29 per diluted share, a decrease from $1,272.8 million in 2019. A $35.4 million foreign currency loss impacted Q4 results. Self-storage net operating income increased by $16.5 million in Q4, driven by improved occupancy. The company continues to focus on innovation and acquisitions, with plans for growth in 2021.

Positive

• Self-storage net operating income increased by $16.5 million in Q4, highlighting effective management.
• Improved occupancy rates led to a 0.8% revenue increase for Same Store Facilities in Q4.
• Acquired 43 facilities in Q4, expanding capacity by 3.7 million net rentable square feet.

Negative

• Net income for Q4 decreased by $35.1 million compared to Q4 2019.
• Full-year 2020 net income decreased by $174.4 million from 2019 due to foreign currency losses and increased expenses.
• Same Store Facility revenues declined by 1.0% for the full year, primarily due to reduced late charges.

Public Storage (NYSE:PSA) announced today operating results for the fourth quarter and year ended December 31, 2020.

Comment from the CEO

“At Public Storage, our focus on the health and safety of employees and customers, enhancing the industry’s leading platform and brand, and utilizing unparalleled capital access to fund growth drove our success in 2020,” said Joe Russell, President and Chief Executive Officer. “The outlook is favorable as we enter 2021. Public Storage is transforming the customer experience through innovation amidst strong consumer demand while executing on a robust external growth environment through property acquisitions, development, and redevelopment.”

Operating Results for the Three Months Ended December 31, 2020

For the three months ended December 31, 2020, net income allocable to our common shareholders was $292.2 million or $1.67 per diluted common share, compared to $327.3 million or $1.87 per diluted common share in 2019 representing a decrease of $35.1 million or $0.20 per diluted common share. The decrease is due primarily to (i) a $35.4 million decrease due to the impact of foreign currency exchange losses associated with our Euro denominated debt and (ii) a $12.3 million increase in general and administrative expense, partially offset by (iii) a $16.5 million increase in self-storage net operating income (described below).

The $16.5 million increase in self-storage net operating income is a result of a $6.3 million increase in our Same Store Facilities (as defined below) and a $10.2 million increase in our non-Same Store Facilities (as defined below). Revenues for the Same Store Facilities increased 0.8% or $4.7 million in the three months ended December 31, 2020 as compared to 2019, due primarily to improved occupancy. Cost of operations for the Same Store Facilities decreased by 1.1% or $1.6 million in the three months ended December 31, 2020 as compared to 2019, due primarily to a 9.3% ($2.6 million) decrease in on-site property manager payroll. The increase in net operating income of $10.2 million for the non-Same Store Facilities is due primarily to the impact of facilities acquired in 2019 and 2020 and the fill-up of recently developed and expanded facilities.

Operating Results for the Year Ended December 31, 2020

In 2020, net income allocable to our common shareholders was $1,098.3 million or $6.29 per diluted common share, compared to $1,272.8 million or $7.29 per diluted common share in 2019 representing a decrease of $174.4 million or $1.00 per diluted common share. The decrease is due primarily to (i) a $105.8 million decrease due to the impact of foreign currency exchange gains and losses associated with our Euro denominated debt, (ii) a $40.3 million increase in depreciation and amortization expense, (iii) a $21.1 million increase in general and administrative expense, (iv) a $15.6 million decrease due to the impact of allocations to preferred shareholders with respect to redemption of preferred shares, and (v) a $8.0 million decrease in self-storage net operating income (described below).

The $8.0 million decrease in self-storage net operating income is a result of a $41.7 million decrease in our Same Store Facilities, offset partially by a $33.7 million increase in our non-Same Store Facilities. Revenues for the Same Store Facilities decreased 1.0% or $23.7 million in 2020 as compared to 2019, due primarily to reduced late charges and administrative fees. Cost of operations for the Same Store Facilities increased by 2.7% or $18.1 million in 2020 as compared to 2019, due primarily to a 22.5% ($11.0 million) increase in marketing expenses, a 3.1% ($7.4 million) increase in property tax expense, and a 2.5% ($3.1 million) increase in on-site property manager payroll expense. The increase in net operating income of $33.7 million for the non-Same Store Facilities is due primarily to the impact of facilities acquired in 2019 and 2020 and the fill-up of recently developed and expanded facilities.

Funds from Operations

For the three months ended December 31, 2020, funds from operations (“FFO”) was $2.57 per diluted common share, as compared to $2.72 in 2019, representing a decrease of 5.5%. FFO is a non-GAAP measure defined by the National Association of Real Estate Investment Trusts and generally represents net income before depreciation and amortization expense, gains and losses and impairment charges with respect to real estate assets. A reconciliation of GAAP diluted net income per share to FFO per share, and additional descriptive information regarding this non-GAAP measure, is attached.

For the year ended December 31, 2020, FFO was $9.75 per diluted common share, as compared to $10.58 in 2019, representing a decrease of 7.8%.

We also present “Core FFO per share,” a non-GAAP measure that represents FFO per share excluding the impact of (i) foreign currency exchange gains and losses, (ii) EITF D-42 charges related to the redemption of preferred securities, and (iii) certain other significant non-cash and/or nonrecurring income or expense items such as loss contingency accruals, casualties, due diligence, and advisory costs. We review Core FFO per share to evaluate our ongoing operating performance, and we believe it is used by investors and REIT analysts in a similar manner. However, Core FFO per share is not a substitute for net income per share. Because other REITs may not compute Core FFO per share in the same manner as we do, may not use the same terminology or may not present such a measure, Core FFO per share may not be comparable among REITs.

The following table reconciles from FFO per share to Core FFO per share (unaudited):

		Three Months Ended December 31,									Year ended December 31,
								Percentage										Percentage
		2020			2019			Change			2020			2019				Change
FFO per share		$	2.57		$	2.72		(5.5	)%		$	9.75		$	10.58			(7.8	)%
Eliminate the per share impact of
items excluded from Core FFO, including
our equity share from investments:
Foreign currency exchange loss (gain)			0.26			0.06						0.56			(0.04	)
Application of EITF D-42			0.06			0.06						0.28			0.21
Other items			0.04			-						0.02			-
Core FFO per share		$	2.93		$	2.84		3.2	%		$	10.61		$	10.75			(1.3	)%

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, 2018. The composition of our Same Store Facilities allows us to more effectively evaluate the ongoing performance of our self-storage portfolio in 2018, 2019, and 2020 and exclude the impact of fill-up of unstabilized facilities, which can significantly affect operating trends. We believe the Same Store information is used by investors and REIT analysts in a similar manner. The following table summarizes the historical operating results of these 2,221 facilities (143.7 million net rentable square feet) that represent approximately 82% of the aggregate net rentable square feet of our U.S. consolidated self-storage portfolio at December 31, 2020.

Selected Operating Data for the Same
Store Facilities (2,221 facilities)
(unaudited):
	Three Months Ended December 31,											Year ended December 31,
									Percentage											Percentage
	2020				2019				Change			2020				2019				Change
	(Dollar amounts in thousands, except for per square foot data)
Revenues:
Rental income	$	600,528			$	588,177			2.1	%		$	2,355,576			$	2,353,625			0.1	%
Late charges and administrative fees		18,984				26,605			(28.6	)%			80,970				106,604			(24.0	)%
Total revenues (a)		619,512				614,782			0.8	%			2,436,546				2,460,229			(1.0	)%
Direct cost of operations (a):
Property taxes		38,778				38,969			(0.5	)%			247,860				240,451			3.1	%
On-site property manager payroll		25,750				28,395			(9.3	)%			125,051				121,978			2.5	%
Repairs and maintenance		12,371				11,667			6.0	%			46,582				47,445			(1.8	)%
Snow removal		598				881			(32.1	)%			2,639				4,058			(35.0	)%
Utilities		9,090				10,327			(12.0	)%			39,459				43,461			(9.2	)%
Marketing		13,075				13,207			(1.0	)%			59,901				48,911			22.5	%
Other direct property costs		17,107				16,149			5.9	%			66,646				65,331			2.0	%
Total direct cost of operations		116,769				119,595			(2.4	)%			588,138				571,635			2.9	%
Direct net operating income (b)		502,743				495,187			1.5	%			1,848,408				1,888,594			(2.1	)%
Indirect cost of operations (a):
Supervisory payroll		(8,769	)			(8,327	)		5.3	%			(39,291	)			(37,719	)		4.2	%
Centralized management costs		(12,204	)			(11,824	)		3.2	%			(47,713	)			(49,453	)		(3.5	)%
Share based compensation		(3,169	)			(2,734	)		15.9	%			(12,686	)			(10,956	)		15.8	%
Net operating income (c)	$	478,601			$	472,302			1.3	%		$	1,748,718			$	1,790,466			(2.3	)%
Gross margin (before indirect costs,
depreciation and amortization expense)		81.2	%			80.5	%		0.9	%			75.9	%			76.8	%		(1.2	)%
Gross margin (before depreciation
and amortization expense)		77.3	%			76.8	%		0.7	%			71.8	%			72.8	%		(1.4	)%
Weighted average for the period:
Square foot occupancy		95.2	%			93.1	%		2.3	%			94.5	%			93.4	%		1.2	%
Realized annual rental income per (d):
Occupied square foot	$	17.56			$	17.60			(0.2	)%		$	17.34			$	17.53			(1.1	)%
Available square foot (“REVPAF”)	$	16.72			$	16.38			2.1	%		$	16.40			$	16.38			0.1	%
At December 31:
Square foot occupancy													94.2	%			91.7	%		2.7	%
Annual contract rent per occupied
square foot (e)												$	17.99			$	18.06			(0.4	)%

(a)		Revenues and cost of operations do not include tenant reinsurance and merchandise sales and expenses generated at the facilities.
(b)		Direct net operating income is a non-GAAP financial measure that excludes the impact of supervisory payroll, centralized management costs and stock based compensation in addition to depreciation and amortization expense. We utilize direct net operating income in evaluating property performance and in evaluating property operating trends as compared to our competitors.
(c)		See attached reconciliation of self-storage net operating income (“NOI”) to net income.
(d)		Realized annual rent per occupied square foot is computed by dividing annualized rental income, before late charges and administrative fees, by the weighted average occupied square feet for the period. Realized annual rent per available square foot (“REVPAF”) is computed by dividing annualized rental income, before late charges and administrative fees, by the total available rentable square feet for the period. These measures exclude late charges and administrative fees in order to provide a better measure of our ongoing level of revenue. Late charges are dependent upon the level of delinquency, and administrative fees are dependent upon the level of move-ins. In addition, the rates charged for late charges and administrative fees can vary independently from rental rates. These measures take into consideration promotional discounts, which reduce rental income.
(e)		Annual contract rent represents the agreed upon monthly rate that is paid by our tenants in place at the time of measurement. Contract rates are initially set in the lease agreement upon move-in and we adjust them from time to time with notice. Contract rent excludes other fees that are charged on a per-item basis, such as late charges and administrative fees, does not reflect the impact of promotional discounts, and does not reflect the impact of rents that are written off as uncollectible.

The following table summarizes selected quarterly financial data with respect to the Same Store Facilities (unaudited):

	For the Quarter Ended
	March 31				June 30				September 30				December 31				Entire Year
	(Amounts in thousands, except for per square foot data)
Total revenues:
2020	$	609,053			$	596,896			$	611,085			$	619,512			$	2,436,546
2019	$	601,805			$	615,564			$	628,078			$	614,782			$	2,460,229
Total cost of operations:
2020	$	182,842			$	185,862			$	178,213			$	140,911			$	687,828
2019	$	175,376			$	173,911			$	177,996			$	142,480			$	669,763
Property taxes:
2020	$	70,097			$	69,913			$	69,072			$	38,778			$	247,860
2019	$	66,744			$	67,466			$	67,272			$	38,969			$	240,451
Repairs and maintenance, including
snow removal expenses:
2020	$	12,381			$	11,292			$	12,579			$	12,969			$	49,221
2019	$	13,745			$	12,056			$	13,154			$	12,548			$	51,503
Marketing:
2020	$	14,275			$	16,979			$	15,572			$	13,075			$	59,901
2019	$	8,981			$	12,404			$	14,319			$	13,207			$	48,911
REVPAF:
2020	$	16.24			$	16.13			$	16.50			$	16.72			$	16.40
2019	$	16.00			$	16.41			$	16.72			$	16.38			$	16.38
Weighted average realized annual
rent per occupied square foot:
2020	$	17.44			$	17.11			$	17.27			$	17.56			$	17.34
2019	$	17.31			$	17.46			$	17.75			$	17.60			$	17.53
Weighted average occupancy levels
for the period:
2020		93.1	%			94.3	%			95.5	%			95.2	%			94.5	%
2019		92.5	%			94.0	%			94.2	%			93.1	%			93.4	%

The following table sets forth selected market trends in our Same Store Facilities:

Same Store Facilities Operating Trends by Market (Unaudited)
	Three Months Ended December 31,									Year Ended December 31,
	2020			2019			Change			2020			2019			Change
	(Amounts in thousands, except for per square foot data)
Revenues:
Los Angeles	$	97,353		$	95,413		2.0	%		$	381,535		$	379,097		0.6	%
San Francisco		52,731			50,805		3.8	%			205,558			202,747		1.4	%
New York		39,321			39,238		0.2	%			154,538			157,029		(1.6	)%
Seattle-Tacoma		28,935			28,723		0.7	%			114,606			114,774		(0.1	)%
Washington DC		28,570			28,711		(0.5	)%			112,739			114,483		(1.5	)%
Miami		27,786			27,677		0.4	%			108,598			111,402		(2.5	)%
Chicago		30,292			30,012		0.9	%			118,560			119,281		(0.6	)%
Atlanta		21,077			21,612		(2.5	)%			83,511			87,518		(4.6	)%
Dallas-Ft. Worth		20,955			21,150		(0.9	)%			83,162			84,988		(2.1	)%
Houston		17,791			18,141		(1.9	)%			70,975			73,683		(3.7	)%
Orlando-Daytona		15,306			15,701		(2.5	)%			60,772			62,869		(3.3	)%
Philadelphia		15,312			14,857		3.1	%			59,666			59,120		0.9	%
West Palm Beach		11,820			11,672		1.3	%			46,038			46,664		(1.3	)%
Tampa		11,760			11,849		(0.8	)%			46,216			47,706		(3.1	)%
Charlotte		10,486			10,393		0.9	%			41,006			41,781		(1.9	)%
All other markets		190,017			188,828		0.6	%			749,066			757,087		(1.1	)%
Total revenues	$	619,512		$	614,782		0.8	%		$	2,436,546		$	2,460,229		(1.0	)%
Net operating income:
Los Angeles	$	81,416		$	80,378		1.3	%		$	309,991		$	311,049		(0.3	)%
San Francisco		43,335			41,351		4.8	%			163,962			162,667		0.8	%
New York		31,321			30,932		1.3	%			108,681			111,424		(2.5	)%
Seattle-Tacoma		23,085			23,808		(3.0	)%			86,874			89,440		(2.9	)%
Washington DC		22,759			22,456		1.3	%			82,415			84,704		(2.7	)%
Miami		24,997			24,371		2.6	%			79,472			82,910		(4.1	)%
Chicago		19,161			18,989		0.9	%			62,749			63,319		(0.9	)%
Atlanta		16,502			16,767		(1.6	)%			59,940			64,423		(7.0	)%
Dallas-Ft. Worth		17,003			16,693		1.9	%			56,020			58,192		(3.7	)%
Houston		11,296			11,178		1.1	%			43,073			45,793		(5.9	)%
Orlando-Daytona		11,853			12,115		(2.2	)%			42,568			45,282		(6.0	)%
Philadelphia		11,458			10,713		7.0	%			41,572			41,592		(0.0	)%
West Palm Beach		8,779			8,650		1.5	%			32,752			34,125		(4.0	)%
Tampa		8,984			9,039		(0.6	)%			31,290			33,421		(6.4	)%
Charlotte		7,739			7,383		4.8	%			29,509			30,104		(2.0	)%
All other markets		138,913			137,479		1.0	%			517,850			532,021		(2.7	)%
Total net operating income	$	478,601		$	472,302		1.3	%		$	1,748,718		$	1,790,466		(2.3	)%

Same Store Facilities Operating Trends by Market (Continued)
	Three Months Ended December 31,											Year Ended December 31,
	2020				2019				Change			2020				2019				Change
Weighted average square foot
occupancy:
Los Angeles		97.7	%			95.3	%		2.5	%			96.7	%			95.2	%		1.6	%
San Francisco		97.7	%			93.7	%		4.3	%			96.1	%			94.3	%		1.9	%
New York		95.9	%			93.6	%		2.5	%			95.2	%			94.1	%		1.2	%
Seattle-Tacoma		94.4	%			92.2	%		2.4	%			94.1	%			93.0	%		1.2	%
Washington DC		95.2	%			92.5	%		2.9	%			94.4	%			93.4	%		1.1	%
Miami		96.2	%			93.1	%		3.3	%			94.4	%			93.0	%		1.5	%
Chicago		94.6	%			92.4	%		2.4	%			93.8	%			92.1	%		1.8	%
Atlanta		94.0	%			92.2	%		2.0	%			92.8	%			93.0	%		(0.2	)%
Dallas-Ft. Worth		93.2	%			91.8	%		1.5	%			92.9	%			92.1	%		0.9	%
Houston		92.9	%			91.2	%		1.9	%			92.1	%			90.1	%		2.2	%
Orlando-Daytona		94.7	%			93.4	%		1.4	%			94.4	%			94.2	%		0.2	%
Philadelphia		96.7	%			94.6	%		2.2	%			96.1	%			95.3	%		0.8	%
West Palm Beach		96.3	%			94.0	%		2.4	%			95.0	%			94.0	%		1.1	%
Tampa		94.8	%			92.3	%		2.7	%			93.4	%			92.6	%		0.9	%
Charlotte		94.5	%			91.7	%		3.1	%			93.0	%			91.9	%		1.2	%
All other markets		94.8	%			92.9	%		2.0	%			94.5	%			93.6	%		1.0	%
Total weighted average
square foot occupancy		95.2	%			93.1	%		2.3	%			94.5	%			93.4	%		1.2	%
Realized annual rent per
occupied square foot:
Los Angeles	$	26.20			$	26.02			0.7	%		$	25.88			$	25.86			0.1	%
San Francisco		26.97				26.85			0.4	%			26.64				26.62			0.1	%
New York		25.90				26.16			(1.0	)%			25.62				26.05			(1.7	)%
Seattle-Tacoma		20.56				20.65			(0.4	)%			20.33				20.42			(0.4	)%
Washington DC		21.32				21.72			(1.8	)%			21.11				21.45			(1.6	)%
Miami		19.91				20.18			(1.3	)%			19.77				20.36			(2.9	)%
Chicago		15.21				15.21			0.0	%			14.96				15.15			(1.3	)%
Atlanta		13.17				13.55			(2.8	)%			13.15				13.56			(3.0	)%
Dallas-Ft. Worth		13.46				13.60			(1.0	)%			13.36				13.63			(2.0	)%
Houston		12.71				13.00			(2.2	)%			12.75				13.39			(4.8	)%
Orlando-Daytona		13.62				13.97			(2.5	)%			13.54				13.89			(2.5	)%
Philadelphia		17.27				16.84			2.6	%			16.86				16.65			1.3	%
West Palm Beach		18.78				18.72			0.3	%			18.51				18.72			(1.1	)%
Tampa		13.78				14.04			(1.9	)%			13.70				14.10			(2.8	)%
Charlotte		11.16				11.27			(1.0	)%			11.07				11.29			(1.9	)%
All other markets		14.56				14.55			0.1	%			14.35				14.48			(0.9	)%
Total realized rent per
occupied square foot	$	17.56			$	17.60			(0.2	)%		$	17.34			$	17.53			(1.1	)%

Same Store Facilities Operating Trends by Market (Continued)
	Three Months Ended December 31,										Year Ended December 31,
	2020			2019			Change				2020			2019			Change
REVPAF:
Los Angeles	$	25.59		$	24.81		3.1	%			$	25.02		$	24.62		1.6	%
San Francisco		26.35			25.17		4.7	%				25.61			25.09		2.1	%
New York		24.85			24.50		1.4	%				24.39			24.50		(0.4	)%
Seattle-Tacoma		19.40			19.04		1.9	%				19.13			18.99		0.7	%
Washington DC		20.29			20.09		1.0	%				19.93			20.03		(0.5	)%
Miami		19.14			18.79		1.9	%				18.66			18.93		(1.4	)%
Chicago		14.39			14.05		2.4	%				14.04			13.95		0.6	%
Atlanta		12.38			12.49		(0.9	)%				12.20			12.62		(3.3	)%
Dallas-Ft. Worth		12.54			12.49		0.4	%				12.41			12.55		(1.1	)%
Houston		11.81			11.86		(0.4	)%				11.75			12.06		(2.6	)%
Orlando-Daytona		12.90			13.05		(1.1	)%				12.78			13.08		(2.3	)%
Philadelphia		16.70			15.94		4.8	%				16.20			15.86		2.1	%
West Palm Beach		18.08			17.59		2.8	%				17.59			17.59		0.0	%
Tampa		13.05			12.96		0.7	%				12.80			13.06		(2.0	)%
Charlotte		10.55			10.33		2.1	%				10.29			10.38		(0.9	)%
All other markets		13.80			13.53		2.0	%				13.57			13.55		0.1	%
Total REVPAF	$	16.72		$	16.38		2.1	%			$	16.40		$	16.38		0.1	%

Property Operations – Non-Same Store Facilities

In addition to our Same Store Facilities, at December 31, 2020 we had 327 facilities that were not stabilized with respect to occupancies or rental rates since January 1, 2018 or that we did not own as of January 1, 2018. The following table summarizes operating data with respect to these 327 facilities (unaudited). Additional data and metrics with respect to these facilities is included in the MD&A in our December 31, 2020 Form 10-K.

NON-SAME STORE	Three Months Ended December 31,										Year ended December 31,
FACILITIES	2020			2019			Change				2020			2019			Change
	(Dollar amounts in thousands, except for per square foot data)
Revenues:
Acquired Facilities:
2018 Acquisitions	$	4,450		$	4,143		$	307			$	17,119		$	16,029		$	1,090
2019 Acquisitions		8,599			5,861			2,738				31,334			12,704			18,630
2020 Acquisitions		5,997			-			5,997				11,365			-			11,365
		19,046			10,004			9,042				59,818			28,733			31,085
Developed and expanded facilities:
Developed in 2015		4,722			4,539			183				18,228			17,630			598
Developed in 2016 - 2018		19,010			15,873			3,137				70,180			56,868			13,312
Developed in 2019		2,106			849			1,257				6,455			1,720			4,735
Developed in 2020		215			-			215				301			-			301
Expansions completed before 2019		9,052			7,891			1,161				33,921			29,354			4,567
Expansions completed in 2019 or 2020		10,030			8,022			2,008				36,031			28,898			7,133
Expansions in process		3,792			4,081			(289	)			15,648			16,573			(925	)
		48,927			41,255			7,672				180,764			151,043			29,721
Other non-same store facilities		11,453			10,986			467				44,502			44,547			(45	)
Total revenues		79,426			62,245			17,181				285,084			224,323			60,761
Cost of operations before
depreciation and amortization:
Acquired Facilities:
2018 Acquisitions		1,811			1,644			167				7,562			7,278			284
2019 Acquisitions		3,364			2,300			1,064				13,323			5,178			8,145
2020 Acquisitions		3,072			-			3,072				6,742			-			6,742
		8,247			3,944			4,303				27,627			12,456			15,171
Developed and expanded facilities:
Developed in 2015		1,172			1,223			(51	)			5,720			5,842			(122	)
Developed in 2016 - 2018		6,467			5,887			580				29,728			27,694			2,034
Developed in 2019		1,139			637			502				4,685			1,915			2,770
Developed in 2020		173			-			173				383			-			383
Expansions completed before 2019		2,718			2,352			366				11,492			10,462			1,030
Expansions completed in 2019 or 2020		4,658			3,734			924				19,372			14,571			4,801
Expansions in process		1,079			894			185				4,262			3,828			434
		17,406			14,727			2,679				75,642			64,312			11,330
Other non-same store facilities		3,750			3,768			(18	)			16,446			15,885			561
Total cost of operations		29,403			22,439			6,964				119,715			92,653			27,062

NON-SAME STORE	Three Months Ended December 31,										Year ended December 31,
FACILITIES (continued)	2020			2019			Change				2020				2019				Change
Net operating income:
Acquired Facilities:
2018 Acquisitions	$	2,639		$	2,499		$	140			$	9,557			$	8,751			$	806
2019 Acquisitions		5,235			3,561			1,674				18,011				7,526				10,485
2020 Acquisitions		2,925			-			2,925				4,623				-				4,623
		10,799			6,060			4,739				32,191				16,277				15,914
Developed and expanded facilities:
Developed in 2015		3,550			3,316			234				12,508				11,788				720
Developed in 2016 - 2018		12,543			9,986			2,557				40,452				29,174				11,278
Developed in 2019		967			212			755				1,770				(195	)			1,965
Developed in 2020		42			-			42				(82	)			-				(82	)
Expansions completed before 2019		6,334			5,539			795				22,429				18,892				3,537
Expansions completed in 2019 or 2020		5,372			4,288			1,084				16,659				14,327				2,332
Expansions in process		2,713			3,187			(474	)			11,386				12,745				(1,359	)
		31,521			26,528			4,993				105,122				86,731				18,391
Other non-same store facilities		7,703			7,218			485				28,056				28,662				(606	)
Net operating income (a)	$	50,023		$	39,806		$	10,217			$	165,369			$	131,670			$	33,699

(a)	See attached reconciliation of self-storage NOI to net income.

Investing and Capital Activities

During the three months ended December 31, 2020, we acquired 43 self-storage facilities (five each in Michigan and Pennsylvania, four each in Alabama, Illinois and Texas, three each in Georgia and Missouri, two each in Arizona, Colorado, Florida, Minnesota and Ohio and one each in Maryland, Nevada, Oklahoma, Oregon and Washington) with 3.7 million net rentable square feet for $513.7 million. During 2020, we acquired 62 self-storage facilities (six in Ohio, five each in Michigan and Pennsylvania, four each in Alabama, Illinois, Minnesota and Texas, three each in California, Colorado, Florida, Georgia and Missouri, two each in Arizona, New York and Tennessee and one each in Indiana, Massachusetts, Maryland, Nebraska, Nevada, Oklahoma, Oregon, Utah and Washington) with 5.1 million net rentable square feet for $796.1 million.

Subsequent to December 31, 2020, we acquired or were under contract to acquire 40 self-storage facilities across 18 states with 3.5 million net rentable square feet, for $580.1 million.

During the three months ended December 31, 2020, we opened one newly developed facility and various expansion projects (0.4 million net rentable square feet – 0.2 million in Missouri and 0.1 million each in Florida and Texas) costing $41.3 million. During 2020, we opened three newly developed facilities and various expansion projects (1.1 million net rentable square feet – 0.5 million in Florida, 0.2 million each in Minnesota and Missouri and 0.1 million each in California and Texas) costing $138.7 million. At December 31, 2020, we had various facilities in development (1.4 million net rentable square feet) estimated to cost $235 million and various expansion projects (2.2 million net rentable square feet) estimated to cost $326 million. Our aggregate 3.6 million net rentable square foot pipeline of development and expansion facilities includes 1.3 million in California, 1.0 million in Florida, 0.2 million each in New York, Texas, Virginia and Washington and 0.5 million in other states. The remaining $373 million of development costs for these projects is expected to be incurred primarily in the next 18 to 24 months.

On October 6, 2020, we issued our 3.875% Series N Preferred Shares for gross proceeds of $283 million.

On November 9, 2020, we issued our 3.9% Series O Preferred Shares for gross proceeds of $170 million.

On January 19, 2021, we completed a public offering of $500 million Senior Unsecured Notes bearing interest at a fixed rate of 0.875% and maturing on February 15, 2026.

On January 20, 2021, we redeemed our 5.40% Series B Preferred Shares for $300 million. We called these shares for redemption in December 2020 and classified the liquidation amount as a liability on our balance sheet at December 31, 2020.

Distributions Declared

On February 16, 2021, our Board of Trustees declared a regular common quarterly dividend of $2.00 per common share. The Board also declared dividends with respect to our various series of preferred shares. All the dividends are payable on March 31, 2021 to shareholders of record as of March 16, 2021.

Fourth Quarter Conference Call

A conference call is scheduled for February 25, 2021 at 9:00 a.m. (PST) to discuss the fourth quarter earnings results. The domestic dial-in number is (866) 406-5408, and the international dial-in number is (973) 582-2770 (conference ID number for either domestic or international is 8057778). A simultaneous audio webcast may be accessed by using the link at www.publicstorage.com under “About Us, Investor Relations, News and Events, Events Calendar.” A replay of the conference call may be accessed through March 11, 2021 by calling (800) 585-8367 (domestic), (404) 537-3406 (international) or by using the link at www.publicstorage.com under “About Us, Investor Relations, News and Events, Events Calendar.” All forms of replay utilize conference ID number 8057778.

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 December 31, 2020, we had: (i) interests in 2,548 self-storage facilities located in 38 states with approximately 175 million net rentable square feet in the United States, (ii) an approximate 35% common equity interest in Shurgard Self Storage SA (Euronext Brussels:SHUR) which owned 241 self-storage facilities located in seven Western European nations with approximately 13 million net rentable square feet operated under the “Shurgard” brand and (iii) an approximate 42% common equity interest in PS Business Parks, Inc. (NYSE:PSB) which owned and operated approximately 28 million rentable square feet of commercial space at December 31, 2020. Our headquarters are located in Glendale, California.

This press release, our Form 10-K for the year ended December 31, 2020, a financial supplement, and additional information about Public Storage is available on our website, www.publicstorage.com.

We expect to release our 2020 Annual Report on Form 10-K within approximately one business day.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements in this press release, other than statements of historical fact, are forward-looking statements which may be identified by the use of the words “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. Factors and risks 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 25, 2020 and in our other filings with the SEC including: general risks associated with the ownership and operation of real estate, including changes in demand, risk related to development, expansion and acquisition of self-storage facilities, potential liability for environmental contamination, natural disasters and adverse changes in laws and regulations governing property tax, real estate and zoning; risks associated with downturns in the national and local economies in the markets in which we operate, including risks related to current economic conditions and the economic health of our customers; risks associated with the COVID Pandemic or similar events, including but not limited to illness or death of our employees or customers, negative impacts to the economic environment and to self-storage customers which could reduce the demand for self-storage or reduce our ability to collect rent, and/or potential regulatory actions to (i) close our facilities if we were determined not to be an “essential business” or for other reasons, (ii) limit our ability to increase rent or otherwise limit the rent we can charge or (iii) limit our ability to collect rent or evict delinquent tenants; the risk that there could be an out-migration of population from certain high-cost major markets, if it is determined that the ability to “work from home,” which has become more prominent during the COVID Pandemic, could allow certain workers to live in less expensive localities, which could negatively impact the occupancies and revenues of our properties in such major high-cost markets; risk that even though many initial restrictions due to the COVID Pandemic have eased, they could be reinstituted in response to increases in infections or if additional pandemics occur; risk that we could experience a change in the move-out patterns of our long-term customers due to economic uncertainty and the significant increase in unemployment resulting from the COVID Pandemic. This could lead to lower occupancies and rent “roll down” as long-term customers are replaced with new customers at lower rates; risk of negative impacts on the cost and availability of debt and equity capital as a result of the COVID Pandemic, which could have a material impact upon our capital and growth plans; the impact of competition from new and existing self-storage and commercial facilities and other storage alternatives; the risk that our existing self-storage facilities may be at a disadvantage in competing with newly developed facilities with more visual and customer appeal; risks related to increased reliance on Google as a customer acquisition channel; difficulties in our ability to successfully evaluate, finance, integrate into our existing operations and manage properties that we acquire directly or through the acquisition of entities that own and operate self-storage facilities; risks associated with international operations including, but not limited to, unfavorable foreign currency rate fluctuations, changes in tax laws and local and global economic uncertainty that could adversely affect our earnings and cash flows; risks related to our participation in joint ventures; the impact of the legal and regulatory environment, as well as national, state and local laws and regulations including, without limitation, those governing environmental issues, taxes, our tenant reinsurance business, and labor, including risks related to the impact of new laws and regulations; risks of increased tax expense associated either with a possible failure by us to qualify as a REIT, or with challenges to the determination of taxable income for our taxable REIT subsidiaries; risks due to ballot initiatives or other actions that could remove the protections of Proposition 13 with respect to our real estate and result in substantial increases in our assessed values and property tax bills in California; changes in United States federal or state tax laws related to the taxation of REITs and other corporations; security breaches or a failure of our networks, systems or technology could adversely impact our operations or our business, customer and employee relationships or result in fraudulent payments; risks associated with the self-insurance of certain business risks, including property and casualty insurance, employee health insurance and workers compensation liabilities; difficulties in raising capital at a reasonable cost; delays and cost overruns on our projects to develop new facilities or expand our existing facilities; ongoing litigation and other legal and regulatory actions which may divert management’s time and attention, require us to pay damages and expenses or restrict the operation of our business; and economic uncertainty due to the impact of war or terrorism. These forward-looking statements speak only as of the date of this press release. All of our forward-looking statements, including those in this press release, are qualified in their entirety by this 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.

PUBLIC STORAGE SELECTED INCOME STATEMENT DATA (Amounts in thousands, except per share data) (Unaudited)
		Three Months Ended								Year Ended
		December 31,								December 31,
		2020				2019				2020				2019
Revenues:
Self-storage facilities		$	698,938			$	677,027			$	2,721,630			$	2,684,552
Ancillary operations			49,598				42,965				193,438				170,556
			748,536				719,992				2,915,068				2,855,108
Expenses:
Self-storage cost of operations			170,314				164,919				807,543				762,416
Ancillary cost of operations			15,838				12,215				59,919				50,736
Depreciation and amortization			141,406				134,885				553,257				512,918
General and administrative			30,140				17,855				83,199				62,146
Interest expense			14,235				12,647				56,283				45,641
			371,933				342,521				1,560,201				1,433,857
Other increases (decreases) to net income:
Interest and other income			3,522				6,028				22,323				26,683
Equity in earnings of unconsolidated real estate entities			17,634				13,916				80,497				69,547
Gain on sale of real estate			376				-				1,493				341
Foreign currency exchange (loss) gain			(45,703	)			(10,318	)			(97,953	)			7,829
Net income			352,432				387,097				1,361,227				1,525,651
Allocation to noncontrolling interests			(1,165	)			(1,082	)			(4,014	)			(5,117	)
Net income allocable to Public Storage shareholders			351,267				386,015				1,357,213				1,520,534
Allocation of net income to:
Preferred shareholders – distributions			(48,219	)			(51,614	)			(207,068	)			(210,179	)
Preferred shareholders – redemptions			(9,883	)			(6,153	)			(48,265	)			(32,693	)
Restricted share units			(999	)			(997	)			(3,545	)			(4,895	)
Net income allocable to common shareholders		$	292,166			$	327,251			$	1,098,335			$	1,272,767
Per common share:
Net income per common share – Basic		$	1.67			$	1.88			$	6.29			$	7.30
Net income per common share – Diluted		$	1.67			$	1.87			$	6.29			$	7.29
Weighted average common shares – Basic			174,532				174,383				174,494				174,287
Weighted average common shares – Diluted			174,749				174,590				174,642				174,530

PUBLIC STORAGE SELECTED BALANCE SHEET DATA (Amounts in thousands, except share and per share data)
		December 31, 2020				December 31, 2019
ASSETS		(Unaudited)
Cash and equivalents		$	257,560			$	409,743
Operating real estate facilities:
Land and buildings, at cost			17,372,627				16,289,146
Accumulated depreciation			(7,152,135	)			(6,623,475	)
			10,220,492				9,665,671
Construction in process			188,079				141,934
Investments in unconsolidated real estate entities			773,046				767,816
Goodwill and other intangible assets, net			204,654				205,936
Other assets			172,715				174,344
Total assets		$	11,816,546			$	11,365,444
LIABILITIES AND EQUITY
Senior unsecured notes		$	2,519,762			$	1,875,218
Mortgage notes			25,230				27,275
Preferred shares called for redemption			300,000				-
Accrued and other liabilities			394,655				383,284
Total liabilities			3,239,647				2,285,777
Equity:
Public Storage shareholders’ equity:
Cumulative Preferred Shares, $0.01 par value, 100,000,000 shares
authorized, 151,700 shares issued (in series) and outstanding,
(162,600 at December 31, 2019) at liquidation preference			3,792,500				4,065,000
Common Shares, $0.10 par value, 650,000,000 shares authorized,
174,581,742 shares issued and outstanding, (174,418,615 shares
at December 31, 2019)			17,458				17,442
Paid-in capital			5,707,101				5,710,934
Accumulated deficit			(914,791	)			(665,575	)
Accumulated other comprehensive loss			(43,401	)			(64,890	)
Total Public Storage shareholders’ equity			8,558,867				9,062,911
Noncontrolling interests			18,032				16,756
Total equity			8,576,899				9,079,667
Total liabilities and equity		$	11,816,546			$	11,365,444

PUBLIC STORAGE SELECTED FINANCIAL DATA   Computation of Funds from Operations and Funds Available for Distribution (Unaudited – amounts in thousands except per share data)
		Three Months Ended								Year Ended
		December 31,								December 31,
		2020				2019				2020				2019
Computation of FFO per Share:
Net income allocable to common shareholders		$	292,166			$	327,251			$	1,098,335			$	1,272,767
Eliminate items excluded from FFO:
Depreciation and amortization			140,491				133,897				549,975				511,413
Depreciation from unconsolidated real estate investments			18,074				19,161				70,681				71,725
Depreciation allocated to noncontrolling interests
and restricted share unitholders			(997	)			(903	)			(3,850	)			(4,208	)
Gains on sale of real estate, including equity
investment share			(376	)			(4,516	)			(12,791	)			(5,896	)
FFO allocable to common shares (a)		$	449,358			$	474,890			$	1,702,350			$	1,845,801
Diluted weighted average common shares			174,749				174,590				174,642				174,530
FFO per share (a)		$	2.57			$	2.72			$	9.75			$	10.58
Reconciliation of Earnings per Share to FFO per Share:
Diluted earnings per share		$	1.67			$	1.87			$	6.29			$	7.29
Eliminate per share amounts excluded from FFO:
Depreciation and amortization			0.90				0.87				3.53				3.32
Gains on sale of real estate			-				(0.02	)			(0.07	)			(0.03	)
FFO per share (a)		$	2.57			$	2.72			$	9.75			$	10.58
Computation of Funds Available for Distribution ("FAD"):
FFO allocable to common shares		$	449,358			$	474,890			$	1,702,350			$	1,845,801
Eliminate effect of items included in FFO but not FAD:
Share-based compensation expense in excess of cash paid			11,014				4,866				22,845				13,671
Foreign currency exchange loss (gain)			45,703				10,318				97,953				(7,829	)
Impact of EITF D-42, including equity investment share			9,883				10,706				48,265				37,246
Less: Capital expenditures to maintain real estate facilities			(37,764	)			(57,140	)			(163,834	)			(192,539	)
FAD (a)		$	478,194			$	443,640			$	1,707,579			$	1,696,350
Distributions paid to common shareholders and restricted
share units		$	349,889			$	349,754			$	1,399,361			$	1,398,570
Distribution payout ratio			73.2	%			78.8	%			82.0	%			82.4	%
Distributions per common share		$	2.00			$	2.00			$	8.00			$	8.00

(a)

FFO and FFO per share are non-GAAP measures defined by the National Association of Real Estate Investment Trusts and, along with the non-GAAP measure FAD, are considered helpful measures of REIT performance by REITs and many REIT analysts. FFO represents GAAP net income before depreciation and amortization, real estate gains or losses and impairment charges, which are excluded because they are based upon historical costs and assume that building values diminish ratably over time, while we believe that real estate values fluctuate due to market conditions. FAD represents FFO adjusted to exclude certain non-cash charges and to deduct capital expenditures. We utilize FAD in evaluating our ongoing cash flow available for investment, debt repayment and common distributions. We believe investors and analysts utilize FAD in a similar manner. FFO and FFO per share are not a substitute for net income or earnings per share. FFO and FAD are not substitutes for GAAP net cash flow in evaluating our liquidity or ability to pay dividends, because they exclude investing and financing activities presented on our statements of cash flows. In addition, other REITs may compute these measures differently, so comparisons among REITs may not be helpful.

PUBLIC STORAGE SELECTED FINANCIAL DATA   Reconciliation of Self-Storage Net Operating Income to Net Income (Unaudited – amounts in thousands)
		Three Months Ended								Year Ended
		December 31,								December 31,
		2020				2019				2020				2019
Self-storage revenues for:
Same Store Facilities		$	619,512			$	614,782			$	2,436,546			$	2,460,229
Acquired facilities			19,046				10,004				59,818				28,733
Developed and expanded facilities			48,927				41,255				180,764				151,043
Other non-same store facilities			11,453				10,986				44,502				44,547
Self-storage revenues			698,938				677,027				2,721,630				2,684,552
Self-storage cost of operations for:
Same Store Facilities			140,911				142,480				687,828				669,763
Acquired facilities			8,247				3,944				27,627				12,456
Developed and expanded facilities			17,406				14,727				75,642				64,312
Other non-same store facilities			3,750				3,768				16,446				15,885
Self-storage cost of operations			170,314				164,919				807,543				762,416
Self-storage NOI for:
Same Store Facilities			478,601				472,302				1,748,718				1,790,466
Acquired facilities			10,799				6,060				32,191				16,277
Developed and expanded facilities			31,521				26,528				105,122				86,731
Other non-same store facilities			7,703				7,218				28,056				28,662
Self-storage NOI (a)			528,624				512,108				1,914,087				1,922,136
Ancillary revenues			49,598				42,965				193,438				170,556
Ancillary cost of operations			(15,838	)			(12,215	)			(59,919	)			(50,736	)
Depreciation and amortization			(141,406	)			(134,885	)			(553,257	)			(512,918	)
General and administrative expense			(30,140	)			(17,855	)			(83,199	)			(62,146	)
Interest and other income			3,522				6,028				22,323				26,683
Interest expense			(14,235	)			(12,647	)			(56,283	)			(45,641	)
Equity in earnings of unconsolidated real estate entities			17,634				13,916				80,497				69,547
Gain on sale of real estate			376				-				1,493				341
Foreign currency exchange (loss) gain			(45,703	)			(10,318	)			(97,953	)			7,829
Net income on our income statement		$	352,432			$	387,097			$	1,361,227			$	1,525,651

(a)

Net operating income or “NOI” is a non-GAAP financial measure that excludes the impact of depreciation and amortization expense, which 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. We utilize NOI in determining current property values, evaluating property performance, and in evaluating operating trends. We believe that investors and analysts utilize NOI in a similar manner. NOI is not a substitute for net income, operating cash flow, or other related GAAP financial measures, in evaluating our operating results. This table reconciles from NOI for our self-storage facilities to the net income presented on our income statement.

 

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FAQ

What were Public Storage's Q4 2020 earnings results?

Public Storage reported a net income of $292.2 million for Q4 2020, or $1.67 per diluted share, a decrease from $327.3 million in Q4 2019.

How did foreign currency affect Public Storage's earnings?

Foreign currency exchange losses of $35.4 million negatively impacted Public Storage's Q4 and full-year earnings.

What factors contributed to the increase in self-storage net operating income?

The increase of $16.5 million in self-storage net operating income was driven by improved occupancy and performance of recently acquired facilities.

How many facilities did Public Storage acquire in 2020?

Public Storage acquired 62 self-storage facilities in 2020, adding a total of 5.1 million net rentable square feet.

What is the outlook for Public Storage in 2021?

Public Storage is optimistic for 2021, focusing on innovation and capitalizing on a robust growth environment.