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Acquisitions to Help Public Storage (PSA) Amidst Competition
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Public Storage (PSA - Free Report) is one of the largest owners and operators of storage facilities in the United States. The ‘Public Storage’ brand is the most recognized and established name in the self-storage industry, with a presence in all major metropolitan markets of the United States. Further, it has managed to create a significant presence in the European markets as well, through the acquisition of Shurgard Storage Centers in 2006.
Additionally, the company has been capitalizing on growth opportunities. In fact, since January 2015, 345 self-storage facilities have been acquired, developed or expanded by the company. Particularly, during 2017, it acquired 22 self-storage facilities, comprising 1.4 million net rentable square feet, for $149.8 million. Following the quarter end, the company acquired or was under contract to acquire two self-storage facilities, spanning 0.2 million net rentable square feet of space, for $18 million. Such acquisitions and expansions bode well for long-term growth.
In fact, Public Storage has one of the strongest balance sheets in the sector, with adequate liquidity to actively pursue acquisitions and developments. Moreover, a solid balance sheet has enabled it to pay sustainable dividends.
Also, shares of Public Storage have outperformed the industry it belongs to in the past month. Its shares have lost 1.8% against the decline of 5.3% incurred by the industry. In addition, the stock has seen the Zacks Consensus Estimate for 2018 funds from operations (FFO) per share being revised 0.2% upward in a weeks’ time.
However, supply has been high in a number of markets and this adversely affects the company’s pricing power. In fact, Public Storage operates in a highly fragmented market in the United States, with intense competition from numerous private, regional and local operators. This limits its power to raise rents and turn on more discounting.
Moreover, the company has a significant development and refurbishment pipeline. In fact, as of Dec 31, 2017, Public Storage had several facilities under development (2.7 million net rentable square feet) with an estimated cost of $367 million as well as expansion projects (1.9 million net rentable square feet) worth roughly $247 million. The company estimates to incur the remaining $350 million of development costs related to these projects, mainly over the next 18 months. Though this is encouraging, the substantial pipeline increases the operational risks and exposes the company to rising construction costs, entitlement delays and failure to fulfill government requirements. Further, self-storage spaces are not usually pre-leased and new assets generally take time to generate yields.
A few better-ranked stocks from the same space include Arbor Realty Trust (ABR - Free Report) , Investor Real Estate Trust (IRET - Free Report) and Extra Space Storage Inc. (EXR - Free Report) . All three stocks carry a Zacks Rank of 2 (Buy).
Arbor Realty Trust’s Zacks Consensus Estimates for 2018 funds from operations (FFO) per share remained unchanged at 90 cents over the past month. Its shares returned 1.7% in three months’ time.
Investor Real Estate Trust’s Zacks Consensus Estimates for fiscal-year 2018 FFO per share have been revised upward by a cent to 36 cents over the past month. The stock rallied 8.4% in a months’ time.
Extra Space Storage’s FFO per share estimates for 2018 have been revised upward 2% to $4.59 over the past month. The stock gained 1.7% during the past three months.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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Acquisitions to Help Public Storage (PSA) Amidst Competition
Public Storage (PSA - Free Report) is one of the largest owners and operators of storage facilities in the United States. The ‘Public Storage’ brand is the most recognized and established name in the self-storage industry, with a presence in all major metropolitan markets of the United States. Further, it has managed to create a significant presence in the European markets as well, through the acquisition of Shurgard Storage Centers in 2006.
Additionally, the company has been capitalizing on growth opportunities. In fact, since January 2015, 345 self-storage facilities have been acquired, developed or expanded by the company. Particularly, during 2017, it acquired 22 self-storage facilities, comprising 1.4 million net rentable square feet, for $149.8 million. Following the quarter end, the company acquired or was under contract to acquire two self-storage facilities, spanning 0.2 million net rentable square feet of space, for $18 million. Such acquisitions and expansions bode well for long-term growth.
In fact, Public Storage has one of the strongest balance sheets in the sector, with adequate liquidity to actively pursue acquisitions and developments. Moreover, a solid balance sheet has enabled it to pay sustainable dividends.
Also, shares of Public Storage have outperformed the industry it belongs to in the past month. Its shares have lost 1.8% against the decline of 5.3% incurred by the industry. In addition, the stock has seen the Zacks Consensus Estimate for 2018 funds from operations (FFO) per share being revised 0.2% upward in a weeks’ time.
However, supply has been high in a number of markets and this adversely affects the company’s pricing power. In fact, Public Storage operates in a highly fragmented market in the United States, with intense competition from numerous private, regional and local operators. This limits its power to raise rents and turn on more discounting.
Moreover, the company has a significant development and refurbishment pipeline. In fact, as of Dec 31, 2017, Public Storage had several facilities under development (2.7 million net rentable square feet) with an estimated cost of $367 million as well as expansion projects (1.9 million net rentable square feet) worth roughly $247 million. The company estimates to incur the remaining $350 million of development costs related to these projects, mainly over the next 18 months. Though this is encouraging, the substantial pipeline increases the operational risks and exposes the company to rising construction costs, entitlement delays and failure to fulfill government requirements. Further, self-storage spaces are not usually pre-leased and new assets generally take time to generate yields.
Public Storage currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stocks to Consider
A few better-ranked stocks from the same space include Arbor Realty Trust (ABR - Free Report) , Investor Real Estate Trust (IRET - Free Report) and Extra Space Storage Inc. (EXR - Free Report) . All three stocks carry a Zacks Rank of 2 (Buy).
Arbor Realty Trust’s Zacks Consensus Estimates for 2018 funds from operations (FFO) per share remained unchanged at 90 cents over the past month. Its shares returned 1.7% in three months’ time.
Investor Real Estate Trust’s Zacks Consensus Estimates for fiscal-year 2018 FFO per share have been revised upward by a cent to 36 cents over the past month. The stock rallied 8.4% in a months’ time.
Extra Space Storage’s FFO per share estimates for 2018 have been revised upward 2% to $4.59 over the past month. The stock gained 1.7% during the past three months.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>