Public Storage expands credit, doubles down on mergers
The REIT upsized its revolving credit facility to $3 billion and announced a $10.5 billion deal for National Storage Affiliates.
The self-storage real-estate investment trust Public Storage (PSA) reported first-quarter results that underscored its push into larger-scale M&A while same-store revenue remained under pressure. Core funds from operations rose 2.4% year-over-year to $4.22 a share, a sharp deceleration from the 18.3% growth posted in the prior-year period.
The quarter stood out for two transformational transactions. Public Storage agreed to acquire National Storage Affiliates Trust in an all-stock deal valued at $10.5 billion, adding more than 1,000 properties and 69 million rentable square feet. The company also entered Canada with the $1.2 billion purchase of Public Storage Canada, which closed 68 properties totaling 5.3 million square feet at 83.1% occupancy.
Revenue for the same-store portfolio was essentially flat at $1.001 billion, while direct operating costs fell 1.6%. The combination lifted same-store net operating income margin 0.4 percentage points to 77.1%. Average occupancy inched up 0.4 percentage points to 91.5%, though realized rental income per occupied square foot slipped 0.3% to $22.00.
Non-same-store net operating income jumped 27.5%, outpacing the 24.8% revenue growth in that segment as newly acquired and developed facilities continued to lease up. The development pipeline expanded to 3.5 million square feet at an estimated cost of $618.4 million.
Public Storage reaffirmed its full-year guidance for same-store net operating income to decline between 3.9% and 0.5% and core FFO of $16.35 to $17.00 a share. The company narrowed its same-store revenue outlook to a range of -2.2% to 0% while keeping expense growth guidance at 1.5% to 2.8%.
On the balance sheet, Public Storage upsized its unsecured revolving credit facility to $3.0 billion from $1.5 billion, extended the maturity to June 2030 with a one-year option, and added a $500 million delayed-draw term loan and a $1.0 billion commercial paper program. The new revolver carries an interest rate of SOFR plus 0.650%, a 15-basis-point reduction from the prior facility. Debt to EBITDA ticked up to 2.9× from 2.8× a year earlier.
The company expects the NSA acquisition to add $0.35 to $0.50 to core FFO per share at stabilization and to generate $110 million to $130 million in annual synergies within three to four years. A joint-venture structure will hold 313 NSA properties, with Public Storage owning 20% and managing the entire portfolio.