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Public Storage Inc. Reports Operating Results (10-K)
Posted by: gurufocus (IP Logged)
Date: March 1, 2011 05:24PM
Public Storage Inc. (PSA) filed Annual Report for the period ended 2010-12-31. Public Storage Inc. has a market cap of $19.09 billion; its shares were traded at around $112.25 with a P/E ratio of 20.9 and P/S ratio of 11.7. The dividend yield of Public Storage Inc. stocks is 2.8%. Public Storage Inc. had an annual average earning growth of 6.3% over the past 10 years. GuruFocus rated Public Storage Inc. the business predictability rank of 5-star.Hedge Fund Gurus that owns PSA: Jim Simons of Renaissance Technologies LLC, Manning & Napier Advisors, Inc, Bruce Kovner of Caxton Associates, Steven Cohen of SAC Capital Advisors. Mutual Fund and Other Gurus that owns PSA: Jeremy Grantham of GMO LLC, Pioneer Investments, Richard Aster Jr of Meridian Fund, First Pacific Advisors of First Pacific Advisors, LLC.
Highlight of Business Operations:
Common Shares, $0.10 Par Value - $12,341,151,000 (computed on the basis of $87.91 per share which was the reported closing sale price of the Company's Common Shares on the New York Stock Exchange on June 30, 2010).
Our business has been negatively affected by the recessionary environment experienced in 2008 through 2010. Occupancies, rental rates and overall rental income at our facilities came under pressure as demand for self-storage space softened. We responded by reducing rental rates, increasing promotional discounts, and increasing our marketing activities to stimulate additional demand for our storage space and increase our market share. Revenues generated by our Same Store facilities decreased from $1.468 billion in 2008 to $1.423 billion in 2009, representing a reduction of 3.1%. Our operating metrics began to stabilize in the latter part of 2009 and started to improve as we moved into the second half of 2010. Revenues generated by our Same Store facilities stabilized in 2010 at $1.428 billion, flat as compared to 2009.
Acquire properties owned or operated by others in the U.S.: We seek to expand our portfolio by acquiring well-located facilities, at generally attractive pricing. We believe our presence in and knowledge of substantially all of the major markets in the U.S. enhances our ability to identify attractive acquisition opportunities and capitalize on the overall fragmentation in the self-storage industry. Data on the rental rates and occupancy levels of our existing facilities, which are often located in proximity to potential acquisition candidates, provide us an advantage in evaluating the potential of acquisition opportunities. During 2008 and 2009, there were few acquisition opportunities. We have increased our acquisitions of self-storage facilities in 2010 as more opportunities became available. During 2010, we acquired 42 facilities (2.7 million net rentable square feet) for approximately $239.6 million. While there can be no assurance, we believe that additional acquisition opportunities may materialize in 2011. In January 2011, we acquired five facilities (386,000 net rentable square feet) in Nevada for approximately $19.5 million.
Participate in the growth of commercial facilities primarily through our ownership in PS Business Parks, Inc.: At December 31, 2010, we had a 41% interest in PSB and its operating partnership which consisted of 5,801,606 shares of common stock and 7,305,355 limited partnership units in the operating partnership. The limited partnership units are convertible at our option, subject to certain conditions, on a one-for-one basis into PSB common stock. At December 31, 2010, PSB owned and operated approximately 21.8 million net rentable square feet of commercial space located in eight states in the U.S. During 2008 through 2010, the recession in the U.S. impacted PSB, resulting in a decrease in rental income for PSB s “same park” facilities. It is uncertain what impact the current recessionary trends will have on PSB s future occupancy levels and rental rents. Due to capital market dislocations and other factors, PSB did not acquire any new commercial space in 2009 and 2008; however, in 2010, PSB acquired a total of 2.4 million net rentable square feet of commercial space for an aggregate cost of approximately $301.7 million. On February 9, 2011, we loaned PSB $121 million which PSB used to re-pay borrowings against their credit facility and repurchase preferred stock. The loan has a six-month term, no prepayment penalties, and bears interest at a rate of three-month LIBOR plus 0.85%.
In the longer term, we believe that there is significant growth potential in Europe to expand the number of facilities owned either through development, acquisition, and consolidation, even if the density of self-storage in Europe does not ultimately approach the levels in the U.S. Capitalizing on this opportunity will require a significant amount of capital and currently Shurgard Europe s ability to raise capital at attractive rates from the European public debt and equity markets, as well as from banks, is constrained. In addition, Shurgard Europe faces refinancing risk, as approximately $125.2 million (€94.5 million) and $147.5 million (€111.3 million) of debt owed by joint ventures matures in May 2011, with a right to extend one year, and July 2013, respectively, and approximately $495.2 million (€373.7 million) in a loan payable to us becomes due in March 2013. Due to these capital constraints and refinancing risks, Shurgard Europe has interrupted its development and growth plans. At such time that public market capital or bank debt becomes available to Shurgard Europe at attractive rates, and economic trends improve, development and growth may recommence; however, there can be no assurance that such development and growth will ultimately recommence and at what levels.
Impact of Current Capital Markets: Our ability to raise additional capital by issuing our common or preferred securities is dependent upon capital market conditions. Capital markets in the U.S. have improved from the severe stress experienced in late 2008 and early 2009, and we have recently issued preferred shares at favorable rates (in April and May, 2010, we issued cumulative preferred shares at a rate of 6.875% for gross proceeds of $145 million, and in October 2010 we issued cumulative preferred shares at a rate of 6.500% for gross proceeds of $125 million). Despite our recent issuances of preferred equity, there can be no assurance that market conditions will continue to permit preferred security issuances at amounts and at rates that we will find attractive.
Stocks Discussed: PSA,