On February 20, 2024, Public Storage (PSA, Financial) released its 8-K filing, detailing its financial performance for the fourth quarter and full year ended December 31, 2023. The company, which is the largest owner of self-storage facilities in the U.S., reported a net income allocable to common shareholders of $1.9 billion for 2023, a decrease from the $4.1 billion reported in 2022. This decline was primarily due to a $2.1 billion gain on the sale of equity investment in PS Business Parks, Inc. in the previous year.
Despite the decrease in net income, Public Storage achieved a 6.1% increase in Core Funds from Operations (Core FFO) per diluted share, reaching $16.89. This growth is particularly noteworthy as it excludes the contribution from PS Business Parks, Inc. The company's revenue also saw a healthy increase, with Same Store revenues growing by 4.7% year-over-year, driven by higher realized annual rent per occupied square foot.
Public Storage's strategic acquisitions have been a key driver of growth. The company closed the acquisition of BREIT Simply Storage LLC, which owns and operates 127 self-storage facilities, and an additional 37 self-storage facilities, for a combined total of $2.7 billion. These acquisitions have significantly expanded Public Storage's portfolio and contributed to its revenue stream.
The company has also been active in developing new facilities and expanding existing ones. In 2023, Public Storage opened 11 newly developed facilities and various expansion projects, adding 1.7 million net rentable square feet to its portfolio. To support these growth initiatives, Public Storage issued $2.2 billion of unsecured senior notes.
Looking ahead to 2024, Public Storage has provided guidance for Core FFO per share to be in the range of $16.60 to $17.20. This guidance reflects the company's expectations for revenue growth, expense growth, and net operating income growth for its Same Store and Non-Same Store facilities.
Public Storage's strong performance in 2023, despite challenges such as increased interest expenses and depreciation, demonstrates the company's resilience and strategic positioning in the self-storage industry. With a solid balance sheet and a focus on growth through acquisitions and development, Public Storage is well-positioned to continue delivering value to its shareholders.
Financial Highlights and Performance Analysis
For the fourth quarter of 2023, Public Storage reported a net income allocable to common shareholders of $389.7 million, or $2.21 per diluted share, compared to $362.6 million, or $2.06 per diluted share for the same period in 2022. This represents an increase of $27.1 million, or $0.15 per diluted share. The increase was primarily due to a $37.6 million increase in self-storage net operating income and a $67.8 million decrease in foreign currency exchange losses.
The company's Same Store direct net operating income margin stood at 79.7%, showcasing the efficiency of its operations. The Non-Same Store Facilities contributed significantly to the net operating income, primarily due to the impact of facilities acquired in 2023.
Public Storage's FFO per diluted common share for the three months ended December 31, 2023, was $3.78, representing an 11.8% increase compared to the same period in 2022. For the year, FFO per diluted common share was $16.60, a 0.9% increase from 2022.
The company's balance sheet remains robust, with significant development and expansion projects in the pipeline. These projects are expected to add 3.6 million net rentable square feet at an estimated cost of $766.2 million.
Public Storage's financial achievements in 2023, including record revenues and net operating income, underscore the company's strong position in the self-storage industry. The company's focus on expanding its portfolio through acquisitions and development, coupled with its high margins and strategic balance sheet management, positions it favorably for continued growth and value creation.
Investors and analysts will be closely watching Public Storage's performance in 2024, as the company navigates market conditions and capitalizes on its strategic initiatives to drive further growth and profitability.
Explore the complete 8-K earnings release (here) from Public Storage for further details.
