Business Wire | Nov 4, 2020 04:02PM EST

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

Nov. 04, 2020

GLENDALE, Calif.--(BUSINESS WIRE)--Nov. 04, 2020--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 $ 2.28 $ 2.76 (17.4 )% $ 7.18 $ 7.86 (8.7 )%share

Eliminatethe per share impactof

itemsexcludedfrom Core FFO,including

our equityshare from investments:

Foreigncurrency 0.24 (0.09 ) 0.30 (0.10 ) exchangeloss (gain)

Application 0.13 0.05 0.22 0.15 of EITF D-42

Other items (0.02 ) 0.01 (0.02 ) (0.01 )

Core FFO per $ 2.63 $ 2.73 (3.7 )% $ 7.68 $ 7.90 (2.8 )%share

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 18,567 27,406 (32.3 )% 62,077 80,114 (22.5 )%administrative fees

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 29,845 31,592 (5.5 )% 99,395 93,694 6.1 %manager payroll

Supervisory payroll 9,720 10,054 (3.3 )% 31,372 30,318 3.5 %

Repairs and 12,602 13,166 (4.3 )% 34,264 35,815 (4.3 )%maintenance

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 16,628 15,733 5.7 % 49,578 49,220 0.7 %costs

Allocated overhead 11,339 11,795 (3.9 )% 36,079 38,300 (5.8 )%

Total cost of 175,727 175,983 (0.1 )% 539,367 521,188 3.5 %operations (a)

Net operating income $ 435,820 $ 452,590 (3.7 )% $ 1,279,065 $ 1,325,737 (3.5 )%(b)



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 $ 16.48 $ 16.71 (1.4 )% $ 16.27 $ 16.37 (0.6 )%("REVPAF")

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):

Revenues and cost of operations do not include ancillary revenues and(a) expenses generated at the facilities with respect to tenant reinsurance and retail sales.

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

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(c) 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.

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(d) 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 December 31 Entire Year 30



(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 andmaintenance, including

snowremoval 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 peroccupied squarefoot:

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 $ 683,949 $ 687,778 $ 2,022,692 $ 2,007,525 facilities

Ancillary 46,708 41,558 133,332 121,799 operations

730,657 729,336 2,156,024 2,129,324



Expenses:

Self-storage cost 206,067 200,369 627,817 590,108 of operations

Ancillary cost of 11,394 11,893 34,121 34,091 operations

Depreciation and 138,333 129,233 411,851 378,033 amortization

General and 21,288 16,908 62,646 51,675 administrative

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 7,214 6,465 19,524 22,012 income

Equity in earnings ofunconsolidated real 21,240 19,045 62,863 55,631 estate entities

Gain on sale of - - 1,117 341 real estate

Foreign currencyexchange (loss) (41,900 ) 15,574 (52,250 ) 18,147 gain

Net income 325,847 399,420 1,008,795 1,138,554

Allocation tononcontrolling (980 ) (1,478 ) (2,849 ) (4,035 )interests

Net incomeallocable to Public 324,867 397,942 1,005,946 1,134,519 Storageshareholders

Allocation of net income to:

Preferredshareholders - (53,892 ) (50,028 ) (158,849 ) (158,565 )distributions

Preferredshareholders - (23,313 ) (9,146 ) (38,382 ) (26,540 )redemptions

Restricted share (746 ) (1,406 ) (2,546 ) (3,898 )units

Net incomeallocable to common $ 246,916 $ 337,362 $ 806,169 $ 945,516 shareholders



Per common share:

Net income percommon share - $ 1.41 $ 1.94 $ 4.62 $ 5.43 Basic

Net income percommon share - $ 1.41 $ 1.93 $ 4.62 $ 5.42 Diluted

Weighted averagecommon shares - 174,503 174,334 174,481 174,255 Basic

Weighted averagecommon shares - 174,626 174,611 174,606 174,510 Diluted

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 BALANCE SHEET DATA

(Amounts in thousands, except share and per share data)



September 30, December 31, 2020 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 769,923 767,816 entities

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 3,640,000 4,065,000 preference

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

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 allocableto common $ 246,916 $ 337,362 $ 806,169 $ 945,516 shareholders

Eliminate items excluded from FFO:

Depreciation and 137,526 128,716 409,484 377,516 amortization

Depreciation fromunconsolidated real 17,492 17,803 52,607 52,564 estate investments

Depreciationallocated to noncontrollinginterests

and restricted share (954 ) (1,019 ) (2,853 ) (3,305 )unitholders

Gains on sale ofreal estate, including equity

investment share (3,174 ) (388 ) (12,415 ) (1,380 )

FFO allocable to $ 397,806 $ 482,474 $ 1,252,992 $ 1,370,911 common shares (a)

Diluted weightedaverage common 174,626 174,611 174,606 174,510 shares

FFO per share (a) $ 2.28 $ 2.76 $ 7.18 $ 7.86



Reconciliation ofEarnings per Share to FFO per Share:



Diluted earnings per $ 1.41 $ 1.93 $ 4.62 $ 5.42 share

Eliminate per shareamounts excluded from FFO:

Depreciation and 0.88 0.83 2.63 2.45 amortization

Gains on sale of (0.01 ) - (0.07 ) (0.01 )real estate

FFO per share (a) $ 2.28 $ 2.76 $ 7.18 $ 7.86



Computation of FundsAvailable for Distribution ("FAD"):



FFO allocable to $ 397,806 $ 482,474 $ 1,252,992 $ 1,370,911 common shares

Eliminate effect ofitems included in FFO but not FAD:

Share-basedcompensation expense 8,115 6,442 11,831 8,805 in excess of cash paid

Foreign currency 41,900 (15,574 ) 52,250 (18,147 )exchange loss (gain)

Impact of EITF D-42,including equity 23,313 9,146 38,382 26,540 investment share

Less: Capitalexpenditures to (30,441 ) (62,840 ) (126,070 ) (135,399 )maintain real estatefacilities (b)



FAD (a) $ 440,693 $ 419,648 $ 1,229,385 $ 1,252,710



Distributions paidto common shareholders andrestricted

share units $ 349,836 $ 349,745 $ 1,049,472 $ 1,048,816



Distribution payout 79.4 % 83.3 % 85.4 % 83.7 %ratio



Distributions per $ 2.00 $ 2.00 $ 6.00 $ 6.00 common share

(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.

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(a) 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.

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(b) 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

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 $ 611,547 $ 628,573 $ 1,818,432 $ 1,846,925 Facilities

Acquired 15,300 8,368 40,772 18,729 facilities

Developed andexpanded 46,349 39,899 131,837 109,788 facilities

Other non-same 10,753 10,938 31,651 32,083 store facilities

Self-storage 683,949 687,778 2,022,692 2,007,525 revenues



Self-storage costof operations for:

Same Store 175,727 175,983 539,367 521,188 Facilities

Acquired 6,655 3,424 19,085 8,395 facilities

Developed andexpanded 19,821 17,125 57,478 49,154 facilities

Other non-same 3,864 3,837 11,887 11,371 store facilities

Self-storage cost 206,067 200,369 627,817 590,108 of operations



Self-storage NOI for:

Same Store 435,820 452,590 1,279,065 1,325,737 Facilities

Acquired 8,645 4,944 21,687 10,334 facilities

Developed andexpanded 26,528 22,774 74,359 60,634 facilities

Other non-same 6,889 7,101 19,764 20,712 store facilities

Self-storage NOI 477,882 487,409 1,394,875 1,417,417 (a)

Ancillary 46,708 41,558 133,332 121,799 revenues

Ancillary cost of (11,394 ) (11,893 ) (34,121 ) (34,091 )operations

Depreciation and (138,333 ) (129,233 ) (411,851 ) (378,033 )amortization

General andadministrative (21,288 ) (16,908 ) (62,646 ) (51,675 )expense

Interest and 7,214 6,465 19,524 22,012 other income

Interest expense (14,282 ) (12,597 ) (42,048 ) (32,994 )

Equity inearnings ofunconsolidated 21,240 19,045 62,863 55,631 real estateentities

Gain on sale of - - 1,117 341 real estate

Foreign currencyexchange (loss) (41,900 ) 15,574 (52,250 ) 18,147 gain

Net income on our $ 325,847 $ 399,420 $ 1,008,795 $ 1,138,554income statement

(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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20201104005707/en/

CONTACT: Ryan Burke (818) 244-8080, Ext. 1141