Public Storage (NYSE:PSA) announced today operating results for the three months ended March 31, 2022.

“Public Storage’s operating strength was pronounced with revenue growth accelerating during the first quarter as we served the needs of over 1.8 million customers,” said Joe Russell, President and Chief Executive Officer. “The Public Storage team continues to deliver exceptional performance utilizing our industry-leading platform, including first-mover technologies and multi-factor external growth, and balance sheet strength.”

Highlights for the Three Months Ended March 31, 2022

• Reported net income allocable to common shareholders of $2.63 per diluted share.
• Reported core FFO allocable to common shareholders (“Core FFO”) of $3.65 per diluted share, an increase of 29.4% relative to the same period in 2021.
• Increased Same Store (as defined below) direct net operating income by 19.3%, resulting from a 15.8% increase in Same Store revenues.
• Achieved 78.8% Same Store direct net operating income margin, an increase of 3.0% relative to the same period in 2021.
• Acquired ten self-storage facilities with 0.8 million net rentable square feet for $127.7 million. Subsequent to March 31, 2022, we acquired or were under contract to acquire eleven self-storage facilities with 0.9 million net rentable square feet, for $147.2 million.
• Completed various expansion projects with 0.1 million net rentable square feet costing $19.4 million. At March 31, 2022, we had various facilities in development and expansion with 4.8 million net rentable square feet estimated to cost $833.8 million.
• Raised $250 million in a public offering of our preferred shares.

Operating Results for the Three Months Ended March 31, 2022

For the three months ended March 31, 2022, net income allocable to our common shareholders was $464.1 million or $2.63 per diluted common share, compared to $385.8 million or $2.21 per diluted common share in 2021, representing an increase of $78.3 million or $0.42 per diluted common share. The increase is due primarily to (i) a $167.3 million increase in self-storage net operating income and (ii) our $23.6 million equity share of gains on sale of real estate recorded by PS Business Parks, Inc. ("PSB") in 2022, partially offset by (iii) a $75.3 million increase in depreciation and amortization expense, (iv) a $17.9 million increase in interest expense, (v) a $10.0 million decrease in foreign currency exchange gains associated with our Euro denominated notes payable, and (vi) a $9.4 million gain on sale of real estate recognized in the three months ended March 31, 2021.

The $167.3 million increase in self-storage net operating income in the three months ended March 31, 2022 as compared to the same period in 2021 is a result of a $95.6 million increase in our Same Store Facilities and a $71.7 million increase in our Non-Same Store Facilities (as defined below). Revenues for the Same Store Facilities increased 15.8% or $102.1 million in the three months ended March 31, 2022 as compared to 2021, due primarily to higher realized annual rent per available square foot. Cost of operations for the Same Store Facilities increased by 3.6% or $6.5 million in the three months ended March 31, 2022 as compared to 2021, due primarily to (i) a 4.8% ($3.2 million) increase in property tax expense, (ii) a 19.0% ($2.5 million) increase in repairs and maintenance expense, and (iii) a 17.5% ($2.3 million) increase in centralized management costs, partially offset by (iv) a 23.1% ($3.4 million) decrease in marketing expenses. The increase in net operating income of $71.7 million for the Non-Same Store Facilities is due primarily to the impact of facilities acquired in 2021 and the fill-up of recently developed and expanded facilities.

Funds from Operations

For the three months ended March 31, 2022, funds from operations (“FFO”) was $3.83 per diluted common share as compared to $3.08 in the same period in 2021, representing an increase of 24.4%. 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.

We also present “Core FFO” and “Core FFO per share,” non-GAAP measures that represent FFO and FFO per share excluding the impact of (i) foreign currency exchange gains and losses, (ii) 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, our equity share of the impact of severance of senior executive and casualties from our equity investees. We review Core FFO and Core FFO per share to evaluate our ongoing operating performance, and we believe they are used by investors and REIT analysts in a similar manner. However, Core FFO and Core FFO per share are not substitutes for net income and net income per share. Because other REITs may not compute Core FFO or Core FFO per share in the same manner as we do, may not use the same terminology, or may not present such measures, Core FFO and Core FFO per share may not be comparable among REITs.

The following table reconciles FFO per share to Core FFO per share and FFO to Core FFO, respectively (unaudited):

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, 2020. The composition of our Same Store Facilities allows us to more effectively evaluate the ongoing performance of our self-storage portfolio in 2020, 2021, and 2022 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 analysts in a similar manner. However, because other REITs may not compute Same Store Facilities in the same manner as we do, may not use the same terminology, or may not present such a measure, Same Store Facilities may not be comparable among REITs. The following table summarizes the historical operating results of these 2,282 facilities (149.5 million net rentable square feet) that represent approximately 75% of the aggregate net rentable square feet of our U.S. consolidated self-storage portfolio at March 31, 2022 (unaudited):

Property Operations – Non-Same Store Facilities

In addition to the 2,282 Same Store Facilities, we have 515 facilities that were not stabilized with respect to occupancies, revenues, or cost of operations since January 1, 2020 or that we did not own as of January 1, 2020, including 304 facilities that were acquired, 54 newly developed facilities, 91 facilities that have been expanded or are targeted for expansion, and 66 facilities that are unstabilized because they are under fill-up or were damaged in casualty events (collectively, the “Non-Same Store Facilities”). Operating data, metrics, and further commentary with respect to these facilities, including detail by vintage, are included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under “Analysis of Net Income - Self-Storage Operations” in our March 31, 2022 Form 10-Q.

Investing and Capital Activities

During the three months ended March 31, 2022, we acquired ten self-storage facilities (three in Texas and one each in Arizona, Indiana, Maryland, Minnesota, North Carolina, Nevada, and Pennsylvania) with 0.8 million net rentable square feet for $127.7 million.

Subsequent to March 31, 2022, we acquired or were under contract to acquire eleven self-storage facilities across nine states with 0.9 million net rentable square feet, for $147.2 million.

During 2021, we acquired a portfolio of 48 properties (4.1 million net rentable square feet) operated under the brand name of ezStorage for $1.8 billion, which includes 47 self-storage facilities and a property that is under construction. These facilities generated revenues of $24.0 million, NOI of $18.6 million (including Direct NOI of $19.4 million), and average square footage occupancy of 88.0% for the three months ended March 31, 2022.

During 2021, we acquired a portfolio of 56 properties (7.5 million net rentable square feet) operated under the brand name of All Storage for $1.5 billion, with 55 properties closed in the fourth quarter of 2021 and one property closed in February 2022. These facilities generated revenues of $16.8 million, NOI of $10.5 million (including Direct NOI of $11.2 million), and average square footage occupancy of 77.3% for the three months ended March 31, 2022.

During the three months ended March 31, 2022, we completed various expansion projects (0.1 million net rentable square feet) costing $19.4 million. At March 31, 2022, we had various facilities in development (2.2 million net rentable square feet) estimated to cost $406.1 million and various expansion projects (2.6 million net rentable square feet) estimated to cost $427.7 million. Our aggregate 4.8 million net rentable square foot pipeline of development and expansion facilities includes 1.2 million in California, 0.6 million in Florida, 0.5 million in Texas, 0.4 million in Maryland, 0.3 million each in New Jersey and Washington, 0.2 million each in Hawaii, Michigan, Nevada and New York, and 0.7 million in other states. The remaining $496.2 million of development costs for these projects is expected to be incurred primarily in the next 18 to 24 months.

On January 13, 2022, we issued our 4.100% Series S Preferred Shares for gross proceeds of $250.0 million.

On April 24, 2022, PSB entered into an Agreement and Plan of Merger (the "Merger Agreement") whereby affiliates of Blackstone Real Estate ("Blackstone") will acquire all outstanding shares of PSB's common stock for $187.50 per share in cash. Subject to the terms and conditions set forth in the Merger Agreement, each share of PSB common stock and each common unit of partnership interest will be converted into the right to receive an amount in cash equal to $187.50, without interest. If the transaction is consummated, we expect to (i) receive approximately $2.7 billion of cash proceeds in exchange for the approximate 41% common equity interest we hold in PSB, (ii) recognize an approximate $2.2 billion gain on the sale of our equity investment in PSB in the Consolidated Statement of Income, and (iii) distribute a $2.3 billion estimated tax gain on the sale to our common shareholders. The merger transaction is expected to close in the third quarter of 2022, however, the merger transaction is subject to customary closing conditions, including approval by PSB’s common stockholders. Pursuant to a support agreement entered into with PSB and Blackstone, we have committed to vote our equity interests in favor of the transaction, subject to certain conditions. Following consummation of the transaction, our future operating results will no longer reflect contributions from our investment in PSB. For the three months ended March 31, 2022 and 2021, our share of earnings from PSB contributed $25.5 million and $24.2 million, respectively, to Core FFO.

Distributions Declared

On April 28, 2022, 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 June 30, 2022 to shareholders of record as of June 15, 2022.

Outlook for the Year Ending December 31, 2022

The following table outlines the Company’s Core FFO per share estimate and certain underlying assumptions for the year ending December 31, 2022, excluding estimates for the impact of the potential sale of our investment in PSB pursuant to PSB's merger agreement with Blackstone:

Forward-looking Core FFO per share measures exclude estimates for the impact of (i) potential sale of our investment in PSB pursuant to PSB's merger agreement with Blackstone, (ii) foreign currency exchange gains and losses, (iii) charges related to the redemption of preferred securities, and (iv) certain other significant non-cash and/or nonrecurring income or expense items such as loss contingency accruals, casualties, transactional due diligence, and advisory costs. Public Storage is unable to provide a reconciliation of Core FFO per share guidance measures to corresponding U.S. GAAP measures on a forward-looking basis without unreasonable effort due to the overall high variability of most of the foregoing items that have been excluded. The items that are being excluded are difficult to predict and a reconciliation could result in disclosure that would be imprecise or potentially misleading. Material changes to any one of these items could have a significant effect on our guidance and future U.S. GAAP results.

First Quarter Conference Call

A conference call is scheduled for May 4, 2022 at 9:00 a.m. (PDT) to discuss the first quarter earnings results. The domestic dial-in number is (888) 632-3382, and the international dial-in number is (785) 424-1250 (conference ID number for either domestic or international is PSAQ122). 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 May 11, 2022 by calling (800) 938-1594 (domestic), (402) 220-1543 (international) or by using the link at www.publicstorage.com under “About Us, Investor Relations, News and Events, Event Calendar.”

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 March 31, 2022, we had: (i) interests in 2,797 self-storage facilities located in 39 states with approximately 199 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 254 self-storage facilities located in seven Western European nations with approximately 14 million net rentable square feet operated under the Shurgard® brand, and (iii) an approximate 41% common equity interest in PS Business Parks, Inc. (NYSE:PSB), which owned and operated approximately 27 million rentable square feet of commercial space at March 31, 2022. Our headquarters are located in Glendale, California.

This press release, our Form 10-Q for the first quarter of 2022, a financial supplement, and additional information about Public Storage are 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. Such forward-looking statements include statements relating to our 2022 outlook and all underlying assumptions, our expected acquisition, disposition, development and redevelopment activity, supply and demand for our self-storage facilities, the consummation of PSB’s recently announced merger transaction and the related consequences to the Company, information relating to operating trends in our markets, expectations regarding operating expenses, including property tax changes, our strategic priorities, expectations with respect to financing activities, rental rates, cap rates and yields, leasing expectations, our credit ratings, and all other statements other than statements of historical fact. Such statements are based on management’s beliefs and assumptions made based on information currently available to management. 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 “outlook,” “guidance,” “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, the risk that the PSB merger will not be consummated on the existing terms or at all, and those factors and risks 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 22, 2022 and in our other filings with the SEC. These include changes in demand for our facilities, impacts of natural disasters, adverse changes in laws and regulations including governing property tax, evictions, rental rates, minimum wage levels and insurance, adverse economic effects from the COVID-19 pandemic, international military conflicts, or similar events impacting public health and/or economic activity, increases in the costs of our primary customer acquisition channels, unfavorable foreign currency rate fluctuations, changes in federal or state tax laws related to the taxation of REITs, and security breaches, including ransomware, or a failure of our networks, systems or technology.

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