Public Storage — 2020 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2020; this is an annual report, not a standalone fourth-quarter filing. Public Storage is a Maryland REIT focused on self-storage, with tenant reinsurance, merchandise sales, third-party management, and equity investments in PS Business Parks and Shurgard.
Business context and key financial metrics
At year-end, the company consolidated 2,548 self-storage facilities in 38 U.S. states, with approximately 175.1 million rentable square feet. It also held about 42% of PS Business Parks and 35% of Shurgard.
| Metric | 2020 | 2019 |
|---|---|---|
| Total revenue | $2.915 billion | $2.855 billion |
| Net income | $1.361 billion | $1.526 billion |
| Net income allocable to common shareholders | $1.098 billion; $6.29 diluted per share | $1.273 billion; $7.29 diluted per share |
| FFO per diluted common share (non-GAAP) | $9.75 | $10.58 |
| Core FFO per diluted common share (non-GAAP) | $10.61 | $10.75 |
| Net cash from operating activities | $2.043 billion | $2.068 billion |
| Cash and equivalents at year-end | $257.6 million | $409.7 million |
| Notes payable, net book value | $2.545 billion | $1.902 billion |
Self-storage revenue was $2.722 billion and segment net operating income (NOI) was $1.914 billion. Same-store NOI margin, calculated as NOI divided by revenue, was 71.8%, versus 72.8% in 2019. Same-store average occupancy rose to 94.5% from 93.4%, while realized annual rent per occupied square foot fell 1.1% to $17.34.
Investing cash outflow included $170.0 million of maintenance capital expenditures, $189.4 million for development and expansion, and $792.3 million for property acquisitions. Financing cash outflow included $1.606 billion of distributions to preferred and common shareholders and restricted share unitholders. The common dividend was $8.00 per share for 2020.
Material changes versus the prior comparable period
- Total revenue increased about 2.1%, supported by acquisitions, newly developed and expanded facilities, and higher ancillary revenue. Same-store revenue declined 1.0%, and same-store NOI declined 2.3%.
- Common-shareholder net income fell $174.4 million, or $1.00 per diluted share. Management attributed the decline principally to a $105.8 million unfavorable year-over-year change in foreign-currency effects, higher depreciation and amortization, higher general and administrative expense, preferred-share redemption allocations, and lower self-storage NOI.
- Same-store costs rose 2.7%; marketing expense increased 22.5% and property taxes increased 3.1%. Tenant reinsurance NOI rose to $120.8 million from $105.7 million.
- Debt increased during the year, including issuance of €500 million of notes. The company also issued $1.25 billion of preferred securities and redeemed preferred securities; $300 million of Series B preferred shares was called for redemption at year-end and redeemed in January 2021.
Outlook, commentary, risks, and unusual items
- Management reported improving same-store trends in the second half: fourth-quarter same-store revenue rose 0.8% year over year. Year-end same-store occupancy was 94.2%, up from 91.7%, while contract rent per occupied foot was nearly flat.
- Management expected continued revenue growth in the first half of 2021, citing demand and modest move-out activity, but noted greater uncertainty in the second half and risks that move-outs could return to historical levels. This is management commentary, not formal earnings guidance.
- Management expected 2021 property-tax expense growth of approximately 5.5%; maintenance capital expenditures of about $250 million in 2021 and $250–$300 million annually over the following several years; and $250–$300 million of retained operating cash flow in 2021.
- At year-end, identified capital resources for the next year were approximately $1.5 billion versus identified needs of about $1.3 billion. Resources included cash, $475.7 million of available revolver capacity, proceeds from a subsequent $500 million senior-note offering, and expected retained operating cash flow. The $500 million notes bear 0.875% interest and mature in 2026.
- Debt principal was approximately $2.558 billion, with a weighted-average effective rate of 2.4%; the filing said there were no material maturities until September 2022. The $500 million revolving facility was undrawn at year-end, subject to $24.3 million of letters of credit.
- Key risks include continuing COVID-19 effects on demand, collections, tenant moves, and regulation; new facility supply and competition; reliance on Google for customer acquisition; property-tax increases, especially in California; development delays and cost overruns; foreign-exchange exposure; and cyber, privacy, environmental, and legal risks. Management said COVID’s future financial effects could be material and could not be estimated.
- Unusual items included a $98.0 million foreign-currency exchange loss on Euro-denominated debt, versus gains in 2019 and 2018, and $48.3 million of preferred-share redemption allocations to common shareholders. No asset impairments were recorded in the periods presented. The 2018 comparison included a $151.6 million gain associated with Shurgard’s public offering.
- The company reported effective disclosure controls and internal control over financial reporting; the auditor issued unqualified opinions on the financial statements and internal controls. The auditor identified purchase-price allocation for 2020 acquisitions as a critical audit matter.
Important facts for investors to verify
- Whether occupancy gains can be sustained while realized rents, same-store revenue, and NOI recover.
- How much 2021 results depend on lower move-outs and pandemic-related changes in customer behavior, and whether those effects reverse.
- Acquisition and development costs, lease-up progress, project contingencies, and returns relative to underwriting expectations.
- Debt balances, foreign-currency exposure, preferred-share redemptions, dividend requirements, and the assumptions behind management’s liquidity estimates.
- Potential property-tax increases, local rent restrictions, new supply, and customer-acquisition costs, particularly in markets with weaker same-store performance.