Public Storage Reports Results for the Three and Nine Months Ended September 30, 2020

Rhea-AI Summary

Public Storage (NYSE:PSA) reported Q3 2020 results with a net income of $246.9 million ($1.41 per share), down from $337.4 million ($1.93 per share) in 2019, a $90.5 million decline. Key factors include a $57.5 million drop from foreign currency impacts, and a $9.5 million decrease in self-storage net operating income. Revenues from Same Store Facilities fell by 2.7% ($17 million). For the nine months, net income decreased to $806.2 million ($4.62 per share), impacted by currency losses and increased expenses. Funds from Operations (FFO) also fell 17.4% in Q3.

Positive

• Increase in net operating income of $7.2 million for non-Same Store Facilities due to acquisitions and expansions.
• Weighted average occupancy for Same Store Facilities improved to 95.5%.

Negative

• Net income decreased by $90.5 million in Q3 2020 compared to Q3 2019.
• Revenues for Same Store Facilities declined by 2.7% in Q3 and 1.5% for the nine-month period.
• FFO decreased by 17.4% in Q3 2020 compared to Q3 2019.

GLENDALE, Calif.--(BUSINESS WIRE)--Public Storage (NYSE:PSA) announced today operating results for the three and nine months ended September 30, 2020.

Operating Results for the Three Months Ended September 30, 2020

For the three months ended September 30, 2020, net income allocable to our common shareholders was $246.9 million or $1.41 per diluted common share, compared to $337.4 million or $1.93 per diluted common share in 2019 representing a decrease of $90.5 million or $0.52 per diluted common share. The decrease is due primarily to (i) a $57.5 million decrease due to the impact of foreign currency exchange gains and losses associated with our Euro denominated debt, (ii) a $14.2 million decrease due to the impact of allocations to preferred shareholders with respect to redemption of preferred shares, (iii) a $9.5 million decrease in self-storage net operating income (described below), and (iv) a $9.1 million increase in depreciation and amortization expense.

The $9.5 million decrease in self-storage net operating income is a result of a $16.8 million decrease in our Same Store Facilities (as defined below), offset by a $7.2 million increase in our non-Same Store Facilities (as defined below). Revenues for the Same Store Facilities decreased 2.7% or $17.0 million in the three months ended September 30, 2020 as compared to 2019, due primarily to lower realized annual rent per occupied square foot and reduced late charges and administrative fees. Cost of operations for the Same Store Facilities decreased by 0.1% or $0.3 million in the three months ended September 30, 2020 as compared to 2019, due primarily to a 5.5% ($1.7 million) decrease in on-site property manager payroll, a 9.2% ($1.1 million) decrease in utility expense, as well as moderation of growth in property tax and marketing expenses. The increase in net operating income of $7.2 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 Nine Months Ended September 30, 2020

For the nine months ended September 30, 2020, net income allocable to our common shareholders was $806.2 million or $4.62 per diluted common share, compared to $945.5 million or $5.42 per diluted common share in 2019 representing a decrease of $139.3 million or $0.80 per diluted common share. The decrease is due primarily to (i) a $70.4 million decrease due to the impact of foreign currency exchange gains and losses associated with our Euro denominated debt, (ii) a $33.8 million increase in depreciation and amortization expense, and (iii) a $22.5 million decrease in self-storage net operating income (described below).

The $22.5 million decrease in self-storage net operating income is a result of a $46.7 million decrease in our Same Store Facilities (as defined below), offset by a $24.1 million increase in our non-Same Store Facilities (as defined below). Revenues for the Same Store Facilities decreased 1.5% or $28.5 million in the nine months ended September 30, 2020 as compared to 2019, due primarily to reduced late charges and administrative fees. Cost of operations for the Same Store Facilities increased by 3.5% or $18.2 million in the nine months ended September 30, 2020 as compared to 2019, due primarily to a 31.1% ($11.1 million) increase in marketing expenses, a 3.8% ($7.6 million) increase in property tax expense, and a 6.1% ($5.7 million) increase in on-site property manager payroll expense. The increase in net operating income of $24.1 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 September 30, 2020, funds from operations (“FFO”) was $2.28 per diluted common share, as compared to $2.76 in the same period in 2019, representing a decrease of 17.4%. 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 nine months ended September 30, 2020, FFO was $7.18 per diluted common share, as compared to $7.86 in the same period in 2019, representing a decrease of 8.7%.

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 non-cash and/or nonrecurring income or expense items primarily representing, with respect to the periods presented below, the impact of casualties, due diligence costs incurred in strategic transactions, and contingency resolutions. 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 September 30,											Nine Months Ended September 30,
										Percentage											Percentage
		2020				2019				Change			2020				2019				Change
FFO per share		$	2.28			$	2.76			(17.4	)%		$	7.18			$	7.86			(8.7	)%
Eliminate the per share impact of
items excluded from Core FFO, including
our equity share from investments:
Foreign currency exchange loss (gain)			0.24				(0.09	)						0.30				(0.10	)
Application of EITF D-42			0.13				0.05							0.22				0.15
Other items			(0.02	)			0.01							(0.02	)			(0.01	)
Core FFO per share		$	2.63			$	2.73			(3.7	)%		$	7.68			$	7.90			(2.8	)%

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 2,224 facilities (143.9 million net rentable square feet) that represent approximately 84% of the aggregate net rentable square feet of our U.S. consolidated self-storage portfolio at September 30, 2020.

Selected Operating Data for the Same
Store Facilities (2,224 facilities)
(unaudited):
	Three Months Ended September 30,											Nine Months Ended September 30,
									Percentage											Percentage
	2020				2019				Change			2020				2019				Change
	(Dollar amounts in thousands, except for per square foot data)
Revenues:
Rental income	$	592,980			$	601,167			(1.4	)%		$	1,756,355			$	1,766,811			(0.6	)%
Late charges and administrative fees		18,567				27,406			(32.3	)%			62,077				80,114			(22.5	)%
Total revenues (a)		611,547				628,573			(2.7	)%			1,818,432				1,846,925			(1.5	)%
Cost of operations:
Property taxes		69,156				67,353			2.7	%			209,346				201,730			3.8	%
On-site property manager payroll		29,845				31,592			(5.5	)%			99,395				93,694			6.1	%
Supervisory payroll		9,720				10,054			(3.3	)%			31,372				30,318			3.5	%
Repairs and maintenance		12,602				13,166			(4.3	)%			34,264				35,815			(4.3	)%
Snow removal		-				-			-				2,041				3,177			(35.8	)%
Utilities		10,841				11,945			(9.2	)%			30,395				33,162			(8.3	)%
Marketing		15,596				14,345			8.7	%			46,897				35,772			31.1	%
Other direct property costs		16,628				15,733			5.7	%			49,578				49,220			0.7	%
Allocated overhead		11,339				11,795			(3.9	)%			36,079				38,300			(5.8	)%
Total cost of operations (a)		175,727				175,983			(0.1	)%			539,367				521,188			3.5	%
Net operating income (b)	$	435,820			$	452,590			(3.7	)%		$	1,279,065			$	1,325,737			(3.5	)%
Gross margin		71.3	%			72.0	%		(1.0	)%			70.3	%			71.8	%		(2.1	)%
Weighted average for the period:
Square foot occupancy		95.5	%			94.2	%		1.4	%			94.3	%			93.6	%		0.7	%
Realized annual rental income per (c):
Occupied square foot	$	17.26			$	17.74			(2.7	)%		$	17.26			$	17.50			(1.4	)%
Available square foot (“REVPAF”)	$	16.48			$	16.71			(1.4	)%		$	16.27			$	16.37			(0.6	)%
At September 30:
Square foot occupancy													94.6	%			92.7	%		2.0	%
Annual contract rent per occupied
square foot (d)												$	17.77			$	18.09			(1.8	)%

(a)	Revenues and cost of operations do not include ancillary revenues and expenses generated at the facilities with respect to tenant reinsurance and retail sales.
(b)	See attached reconciliation of self-storage NOI to net income.
(c)	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.
(d)	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	$	609,535			$	597,350			$	611,547
2019	$	602,297			$	616,055			$	628,573			$	615,268			$	2,462,193
Total cost of operations:
2020	$	180,281			$	183,359			$	175,727
2019	$	173,324			$	171,881			$	175,983			$	140,306			$	661,494
Property taxes:
2020	$	70,187			$	70,003			$	69,156
2019	$	66,827			$	67,550			$	67,353			$	38,904			$	240,634
Repairs and maintenance, including
snow removal expenses:
2020	$	12,395			$	11,308			$	12,602
2019	$	13,758			$	12,068			$	13,166			$	12,572			$	51,564
Marketing:
2020	$	14,296			$	17,005			$	15,596
2019	$	9,001			$	12,426			$	14,345			$	13,230			$	49,002
REVPAF:
2020	$	16.23			$	16.11			$	16.48
2019	$	16.00			$	16.40			$	16.71			$	16.37			$	16.37
Weighted average realized annual
rent per occupied square foot:
2020	$	17.43			$	17.10			$	17.26
2019	$	17.30			$	17.45			$	17.74			$	17.59			$	17.52
Weighted average occupancy levels
for the period:
2020		93.1	%			94.2	%			95.5	%
2019		92.5	%			94.0	%			94.2	%			93.1	%			93.4	%

Property Operations – Non-Same Store Facilities

In addition to the 2,224 Same Store Facilities, we have 280 facilities that were not stabilized with respect to occupancies, revenues or cost of operations since January 1, 2018 or that we did not own as of January 1, 2018, including 88 facilities that were acquired from third parties, 76 newly developed facilities, 71 facilities that have been expanded or are targeted for expansion, and 45 facilities that are unstabilized due to the impact of casualties and other factors (collectively, the “Non-Same Store Facilities”). Operating data, metrics, and further commentary with respect to these facilities, including detail by vintage, is included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under “Self-Storage Operations” in our September 30, 2020 Form 10-Q.

Investing and Capital Activities

During the three months ended September 30, 2020, we acquired four self-storage facilities (two in Minnesota and one in Colorado and Utah) with 0.2 million net rentable square feet for $29.1 million. During the nine months ended September 30, 2020, we acquired 19 self-storage facilities (four in Ohio, three in California, two each in Minnesota, New York and Tennessee and one each in Colorado, Florida, Indiana, Massachusetts, Nebraska and Utah) with 1.4 million net rentable square feet for $282.4 million.

Subsequent to September 30, 2020, we acquired or were under contract to acquire 54 self-storage facilities (six in Michigan, five each in Illinois, Oregon, Pennsylvania and Texas, four in Maryland, three each in Alabama, Georgia and Missouri, two each in Arizona, Colorado, Florida, Minnesota, Nevada and Ohio, and one each in Oklahoma, Virginia and Washington) with 4.9 million net rentable square feet for $686.9 million. A 36 property portfolio is included in the 54 self-storage facilities. Except for 12 properties ($193.9 million) which are under construction and expected to close as they are completed in 2021, these 54 properties are expected to close in the remainder of 2020.

During the three months ended September 30, 2020, we opened various expansion projects (0.2 million net rentable square feet – 0.1 million each in Florida and Missouri) costing $27.4 million. During the nine months ended September 30, 2020, we opened two newly developed facilities and various expansion projects (0.7 million net rentable square feet – 0.3 million in Florida, 0.2 million in Minnesota and 0.1 million each in California and Missouri) costing $97.4 million. At September 30, 2020, we had various facilities in development (1.2 million net rentable square feet) estimated to cost $217 million and various expansion projects (2.5 million net rentable square feet) estimated to cost $347 million. Our aggregate 3.7 million net rentable square foot pipeline of development and expansion facilities includes 1.5 million in California, 1.0 million in Florida, 0.2 million each in Missouri, New York, Texas, Virginia and Washington and 0.2 million in other states. The remaining $387 million of development costs for these projects is expected to be incurred primarily in the next 18 to 24 months.

On August 14, 2020, we issued our 4.125% Series M Preferred Shares for gross proceeds of $230 million.

On September 30, 2020 we redeemed, our 5.20% Series W Preferred Shares for $500 million and our 5.20% Series X Preferred Shares for $225 million.

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

California Proposition 15

As a result of Proposition 13, which limits increases in assessed property values to 2% per year, the assessed value of most of our properties and the property taxes we pay in California are less than they would be if the properties were assessed at current values. An initiative was on California’s November 2020 statewide ballot (“Prop 15”) that, if passed, would result in the reassessment of our California properties and would substantially increase our property tax expense. It is unclear whether Prop 15 passed, as voting results have not been certified. Even if Prop 15 did not pass, there can be no assurance that a similar initiative will not be proposed and pass in the future. If Prop 15 did pass, the timing and level of the reassessment and related property tax increases would be uncertain. See “Risk Factors – We have exposure to increased property tax in California” in our December 31, 2019 Form 10-K for further information such as our 2019 aggregate net operating income and property tax expense in California.

COVID-19 Pandemic

The COVID-19 Pandemic (the “COVID Pandemic”) and the resulting economic recession has and will continue to impact our operations, revenues, cost of operations, as well as our investments and capital availability, as described in more detail in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our September 30, 2020 Form 10-Q.

Distributions Declared

On October 23, 2020, 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 December 30, 2020 to shareholders of record as of December 15, 2020.

Third Quarter Conference Call

A conference call is scheduled for November 5, 2020 at 9:00 a.m. (PST) to discuss the third 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 7738909). 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 November 19, 2020 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, Event Calendar.” All forms of replay utilize conference ID number 7738909.

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 September 30, 2020, we had: (i) interests in 2,504 self-storage facilities located in 38 states with approximately 171 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 239 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 September 30, 2020. Our headquarters are located in Glendale, California.

This press release, our Form 10-Q for the third quarter of 2020, and additional information about Public Storage is 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. 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 (see California Proposition 15 above for further information regarding the outcome of a related November 2020 California ballot initiative); 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								Nine Months Ended
		September 30,								September 30,
		2020				2019				2020				2019
Revenues:
Self-storage facilities		$	683,949			$	687,778			$	2,022,692			$	2,007,525
Ancillary operations			46,708				41,558				133,332				121,799
			730,657				729,336				2,156,024				2,129,324
Expenses:
Self-storage cost of operations			206,067				200,369				627,817				590,108
Ancillary cost of operations			11,394				11,893				34,121				34,091
Depreciation and amortization			138,333				129,233				411,851				378,033
General and administrative			21,288				16,908				62,646				51,675
Interest expense			14,282				12,597				42,048				32,994
			391,364				371,000				1,178,483				1,086,901
Other increases (decreases) to net income:
Interest and other income			7,214				6,465				19,524				22,012
Equity in earnings of unconsolidated real estate entities			21,240				19,045				62,863				55,631
Gain on sale of real estate			-				-				1,117				341
Foreign currency exchange (loss) gain			(41,900	)			15,574				(52,250	)			18,147
Net income			325,847				399,420				1,008,795				1,138,554
Allocation to noncontrolling interests			(980	)			(1,478	)			(2,849	)			(4,035	)
Net income allocable to Public Storage shareholders			324,867				397,942				1,005,946				1,134,519
Allocation of net income to:
Preferred shareholders – distributions			(53,892	)			(50,028	)			(158,849	)			(158,565	)
Preferred shareholders – redemptions			(23,313	)			(9,146	)			(38,382	)			(26,540	)
Restricted share units			(746	)			(1,406	)			(2,546	)			(3,898	)
Net income allocable to common shareholders		$	246,916			$	337,362			$	806,169			$	945,516
Per common share:
Net income per common share – Basic		$	1.41			$	1.94			$	4.62			$	5.43
Net income per common share – Diluted		$	1.41			$	1.93			$	4.62			$	5.42
Weighted average common shares – Basic			174,503				174,334				174,481				174,255
Weighted average common shares – Diluted			174,626				174,611				174,606				174,510

PUBLIC STORAGE SELECTED BALANCE SHEET DATA (Amounts in thousands, except share and per share data)
		September 30, 2020				December 31, 2019
ASSETS		(Unaudited)
Cash and equivalents		$	293,955			$	409,743
Operating real estate facilities:
Land and buildings, at cost			16,784,026				16,289,146
Accumulated depreciation			(7,013,362	)			(6,623,475	)
			9,770,664				9,665,671
Construction in process			176,658				141,934
Investments in unconsolidated real estate entities			769,923				767,816
Goodwill and other intangible assets, net			204,700				205,936
Other assets			169,248				174,344
Total assets		$	11,385,148			$	11,365,444
LIABILITIES AND EQUITY
Senior unsecured notes		$	2,473,819			$	1,875,218
Mortgage notes			25,751				27,275
Accrued and other liabilities			433,524				383,284
Total liabilities			2,933,094				2,285,777
Equity:
Public Storage shareholders’ equity:
Cumulative Preferred Shares, $0.01 par value, 100,000,000 shares
authorized, 145,600 shares issued (in series) and outstanding,
(162,600 at December 31, 2019) at liquidation preference			3,640,000				4,065,000
Common Shares, $0.10 par value, 650,000,000 shares authorized,
174,512,070 shares issued and outstanding, (174,418,615 shares
at December 31, 2019)			17,451				17,442
Paid-in capital			5,706,970				5,710,934
Accumulated deficit			(867,950	)			(665,575	)
Accumulated other comprehensive loss			(62,344	)			(64,890	)
Total Public Storage shareholders’ equity			8,434,127				9,062,911
Noncontrolling interests			17,927				16,756
Total equity			8,452,054				9,079,667
Total liabilities and equity		$	11,385,148			$	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								Nine Months Ended
		September 30,								September 30,
		2020				2019				2020				2019
Computation of FFO per Share:
Net income allocable to common shareholders		$	246,916			$	337,362			$	806,169			$	945,516
Eliminate items excluded from FFO:
Depreciation and amortization			137,526				128,716				409,484				377,516
Depreciation from unconsolidated real estate investments			17,492				17,803				52,607				52,564
Depreciation allocated to noncontrolling interests
and restricted share unitholders			(954	)			(1,019	)			(2,853	)			(3,305	)
Gains on sale of real estate, including equity
investment share			(3,174	)			(388	)			(12,415	)			(1,380	)
FFO allocable to common shares (a)		$	397,806			$	482,474			$	1,252,992			$	1,370,911
Diluted weighted average common shares			174,626				174,611				174,606				174,510
FFO per share (a)		$	2.28			$	2.76			$	7.18			$	7.86
Reconciliation of Earnings per Share to FFO per Share:
Diluted earnings per share		$	1.41			$	1.93			$	4.62			$	5.42
Eliminate per share amounts excluded from FFO:
Depreciation and amortization			0.88				0.83				2.63				2.45
Gains on sale of real estate			(0.01	)			-				(0.07	)			(0.01	)
FFO per share (a)		$	2.28			$	2.76			$	7.18			$	7.86
Computation of Funds Available for Distribution ("FAD"):
FFO allocable to common shares		$	397,806			$	482,474			$	1,252,992			$	1,370,911
Eliminate effect of items included in FFO but not FAD:
Share-based compensation expense in excess of cash paid			8,115				6,442				11,831				8,805
Foreign currency exchange loss (gain)			41,900				(15,574	)			52,250				(18,147	)
Impact of EITF D-42, including equity investment share			23,313				9,146				38,382				26,540
Less: Capital expenditures to maintain real estate facilities (b)			(30,441	)			(62,840	)			(126,070	)			(135,399	)
FAD (a)		$	440,693			$	419,648			$	1,229,385			$	1,252,710
Distributions paid to common shareholders and restricted
share units		$	349,836			$	349,745			$	1,049,472			$	1,048,816
Distribution payout ratio			79.4	%			83.3	%			85.4	%			83.7	%
Distributions per common share		$	2.00			$	2.00			$	6.00			$	6.00

(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.

(b)

Capital expenditures include certain projects that are not traditional like-for-like replacements of existing components, and in certain circumstances upgrade existing components before the end of their functional lives. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under “Overview” and “Liquidity and Capital Resources – Capital Expenditure Requirements” in our September 30, 2020 Form 10-Q for further information.

PUBLIC STORAGE SELECTED FINANCIAL DATA   Reconciliation of Self-Storage Net Operating Income to Net Income (Unaudited – amounts in thousands)
		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2020				2019				2020				2019
Self-storage revenues for:
Same Store Facilities		$	611,547			$	628,573			$	1,818,432			$	1,846,925
Acquired facilities			15,300				8,368				40,772				18,729
Developed and expanded facilities			46,349				39,899				131,837				109,788
Other non-same store facilities			10,753				10,938				31,651				32,083
Self-storage revenues			683,949				687,778				2,022,692				2,007,525
Self-storage cost of operations for:
Same Store Facilities			175,727				175,983				539,367				521,188
Acquired facilities			6,655				3,424				19,085				8,395
Developed and expanded facilities			19,821				17,125				57,478				49,154
Other non-same store facilities			3,864				3,837				11,887				11,371
Self-storage cost of operations			206,067				200,369				627,817				590,108
Self-storage NOI for:
Same Store Facilities			435,820				452,590				1,279,065				1,325,737
Acquired facilities			8,645				4,944				21,687				10,334
Developed and expanded facilities			26,528				22,774				74,359				60,634
Other non-same store facilities			6,889				7,101				19,764				20,712
Self-storage NOI (a)			477,882				487,409				1,394,875				1,417,417
Ancillary revenues			46,708				41,558				133,332				121,799
Ancillary cost of operations			(11,394	)			(11,893	)			(34,121	)			(34,091	)
Depreciation and amortization			(138,333	)			(129,233	)			(411,851	)			(378,033	)
General and administrative expense			(21,288	)			(16,908	)			(62,646	)			(51,675	)
Interest and other income			7,214				6,465				19,524				22,012
Interest expense			(14,282	)			(12,597	)			(42,048	)			(32,994	)
Equity in earnings of unconsolidated real estate entities			21,240				19,045				62,863				55,631
Gain on sale of real estate			-				-				1,117				341
Foreign currency exchange (loss) gain			(41,900	)			15,574				(52,250	)			18,147
Net income on our income statement		$	325,847			$	399,420			$	1,008,795			$	1,138,554

(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.