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Section 1: 10-Q (10-Q)

psa-20190930x10q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

[X]Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2019

or

[   ]Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ____________ to ____________.

Commission File Number: 001-33519

Public Storage
(Exact name of registrant as specified in its charter)

Maryland

95-3551121

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer Identification Number)

701 Western Avenue, Glendale, California

91201-2349

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (818) 244-8080.

Title of Class

 

Trading Symbol

 

Name of exchange on which registered

Common Shares, $0.10 par value

 

PSA

New York Stock Exchange

Depositary Shares Each Representing 1/1,000 of a 5.625% Cum Pref Share, Series U, $0.01 par value

PSAPrU

New York Stock Exchange

Depositary Shares Each Representing 1/1,000 of a 5.375% Cum Pref Share, Series V, $0.01 par value

PSAPrV

New York Stock Exchange

Depositary Shares Each Representing 1/1,000 of a 5.200% Cum Pref Share, Series W, $0.01 par value

PSAPrW

New York Stock Exchange

Depositary Shares Each Representing 1/1,000 of a 5.200% Cum Pref Share, Series X, $0.01 par value

PSAPrX

New York Stock Exchange

Depositary Shares Each Representing 1/1,000 of a 5.875% Cum Pref Share, Series A, $0.01 par value

PSAPrA

New York Stock Exchange

Depositary Shares Each Representing 1/1,000 of a 5.400% Cum Pref Share, Series B, $0.01 par value

PSAPrB

New York Stock Exchange

Depositary Shares Each Representing 1/1,000 of a 5.125% Cum Pref Share, Series C, $0.01 par value

PSAPrC

New York Stock Exchange

Depositary Shares Each Representing 1/1,000 of a 4.950% Cum Pref Share, Series D, $0.01 par value

PSAPrD

New York Stock Exchange

Depositary Shares Each Representing 1/1,000 of a 4.900% Cum Pref Share, Series E, $0.01 par value

PSAPrE

New York Stock Exchange

Depositary Shares Each Representing 1/1,000 of a 5.150% Cum Pref Share, Series F, $0.01 par value

PSAPrF

New York Stock Exchange


Depositary Shares Each Representing 1/1,000 of a 5.050% Cum Pref Share, Series G, $0.01 par value

PSAPrG

New York Stock Exchange

Depositary Shares Each Representing 1/1,000 of a 5.600% Cum Pref Share, Series H, $0.01 par value

PSAPrH

New York Stock Exchange

Depositary Shares Each Representing 1/1,000 of a 4.875% Cum Pref Share, Series I, $0.01 par value

PSAPrI

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for at least the past 90 days.

[X] Yes [   ] No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

[X] Yes [ ] No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

[X]

[ ]

[ ]

[ ]

[ ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

[ ] Yes [X] No

Indicate the number of the registrant’s outstanding common shares of beneficial interest, as of October 28, 2019:

Common Shares of beneficial interest, $0.10 par value per share – 174,680,496 shares


PUBLIC STORAGE

INDEX

PART I

FINANCIAL INFORMATION

Pages

Item 1.

Financial Statements (Unaudited)

Balance Sheets at September 30, 2019 and December 31, 2018

1

Statements of Income for the Three and Nine Months Ended September 30, 2019 and 2018

2

Statements of Comprehensive Income for the Three and Nine Months Ended
September 30, 2019 and 2018

3

Statements of Equity for the Three and Nine Months Ended September 30, 2019 and 2018

4-7

Statements of Cash Flows for the Nine Months Ended September 30, 2019 and 2018

8-9

Condensed Notes to Financial Statements

10-28

Item 2.

Management’s Discussion and Analysis of
Financial Condition and Results of Operations

29-59

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

59

Item 4.

Controls and Procedures

59-60

PART II

OTHER INFORMATION (Items 3, 4 and 5 are not applicable)

Item 1.

Legal Proceedings

61

Item 1A.

Risk Factors

61

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

61

Item 6.

Exhibits

61

 


PUBLIC STORAGE

BALANCE SHEETS

(Amounts in thousands, except share data)

September 30,

December 31,

2019

2018

ASSETS

(Unaudited)

Cash and equivalents

$

541,357 

$

361,218 

Real estate facilities, at cost:

Land

4,152,663 

4,047,982 

Buildings

11,878,809 

11,248,862 

16,031,472 

15,296,844 

Accumulated depreciation

(6,496,989)

(6,140,072)

9,534,483 

9,156,772 

Construction in process

184,033 

285,339 

9,718,516 

9,442,111 

Investments in unconsolidated real estate entities

771,167 

783,988 

Goodwill and other intangible assets, net

211,476 

209,856 

Other assets

171,345 

131,097 

Total assets

$

11,413,861 

$

10,928,270 

LIABILITIES AND EQUITY

Notes payable

$

1,892,435 

$

1,412,283 

Preferred shares called for redemption (Note 8)

287,500 

-

Accrued and other liabilities

444,962 

371,259 

Total liabilities

2,624,897 

1,783,542 

Commitments and contingencies (Note 12)

 

 

Equity:

Public Storage shareholders’ equity:

Preferred Shares, $0.01 par value, 100,000,000 shares authorized,

150,650 shares issued (in series) and outstanding, (161,000 at

December 31, 2018), at liquidation preference

3,766,250 

4,025,000 

Common Shares, $0.10 par value, 650,000,000 shares authorized,

174,378,478 shares issued and outstanding (174,130,881 shares at

December 31, 2018)

17,438 

17,413 

Paid-in capital

5,719,182 

5,718,485 

Accumulated deficit

(650,222)

(577,360)

Accumulated other comprehensive loss

(78,513)

(64,060)

Total Public Storage shareholders’ equity

8,774,135 

9,119,478 

Noncontrolling interests

14,829 

25,250 

Total equity

8,788,964 

9,144,728 

Total liabilities and equity

$

11,413,861 

$

10,928,270 

 


See accompanying notes.

1


PUBLIC STORAGE

STATEMENTS OF INCOME

(Amounts in thousands, except per share amounts)

(Unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2019

2018

2019

2018

Revenues:

Self-storage facilities

$

687,778 

$

666,616 

$

2,007,525 

$

1,943,359 

Ancillary operations

41,558 

39,752 

121,799 

118,461 

729,336 

706,368 

2,129,324 

2,061,820 

Expenses:

Self-storage cost of operations

200,369 

183,637 

590,108 

545,700 

Ancillary cost of operations

11,893 

11,907 

34,091 

33,648 

Depreciation and amortization

129,233 

124,516 

378,033 

362,272 

General and administrative

16,908 

27,429 

51,675 

90,278 

Interest expense

12,597 

8,094 

32,994 

24,589 

371,000 

355,583 

1,086,901 

1,056,487 

Interest and other income

6,465 

7,020 

22,012 

18,892 

Equity in earnings of unconsolidated real estate entities

19,045 

17,771 

55,631 

90,529 

Foreign currency exchange gain

15,574 

2,612 

18,147 

12,738 

Gain on sale of real estate

-

1,401 

341 

1,825 

Net income

399,420 

379,589 

1,138,554 

1,129,317 

Allocation to noncontrolling interests

(1,478)

(1,562)

(4,035)

(4,491)

Net income allocable to Public Storage shareholders

397,942 

378,027 

1,134,519 

1,124,826 

Allocation of net income to:

Preferred shareholders - distributions

(50,028)

(54,080)

(158,565)

(162,238)

Preferred shareholders - redemptions (Note 8)

(9,146)

-

(26,540)

-

Restricted share units

(1,406)

(1,268)

(3,898)

(3,790)

Net income allocable to common shareholders

$

337,362 

$

322,679 

$

945,516 

$

958,798 

Net income per common share:

Basic

$

1.94 

$

1.85 

$

5.43 

$

5.51 

Diluted

$

1.93 

$

1.85 

$

5.42 

$

5.50 

Basic weighted average common shares outstanding

174,334 

173,975 

174,255 

173,933 

Diluted weighted average common shares outstanding

174,611 

174,348 

174,510 

174,240 

 

See accompanying notes.

2


PUBLIC STORAGE

STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in thousands)

(Unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,

2019

2018

2019

2018

Net income

$

399,420 

$

379,589 

$

1,138,554 

$

1,129,317 

Other comprehensive income (loss):

Aggregate foreign currency exchange gain

4,610 

2,874 

3,694 

3,463 

Adjust for aggregate foreign currency exchange

gain included in net income

(15,574)

(2,612)

(18,147)

(12,738)

Other comprehensive (loss) income

(10,964)

262 

(14,453)

(9,275)

Total comprehensive income

388,456 

379,851 

1,124,101 

1,120,042 

Allocation to noncontrolling interests

(1,478)

(1,562)

(4,035)

(4,491)

Comprehensive income allocable to

Public Storage shareholders

$

386,978 

$

378,289 

$

1,120,066 

$

1,115,551 

 

See accompanying notes.

3


PUBLIC STORAGE

STATEMENT OF EQUITY

Three Months Ended September 30, 2019

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

(Unaudited)

Accumulated

Total

Cumulative

Other

Public Storage

Preferred

Common

Paid-in

Accumulated

Comprehensive

Shareholders’

Noncontrolling

Total

Shares

Shares

Capital

Deficit

Loss

Equity

Interests

Equity

Balances at June 30, 2019

$

3,737,500 

$

17,429 

$

5,729,945 

$

(648,391)

$

(67,549)

$

8,768,934 

$

25,576 

$

8,794,510 

Issuance of 12,650 preferred shares (Note 8)

316,250 

-

(8,902)

-

-

307,348 

-

307,348 

Redemption of 11,500 preferred shares (Note 8)

(287,500)

-

-

-

-

(287,500)

-

(287,500)

Issuance of common shares in connection with

share-based compensation (83,955 shares)

-

9 

15,610 

-

-

15,619 

-

15,619 

Share-based compensation expense, net of cash

paid in lieu of common shares