Public Storage Shares Drop After Downgrade

NEW YORK (AP) — A Wells Fargo analyst downgraded real estate investment trust Public Storage Inc. Monday, saying income growth for the self-storage sector will trail a jobs recovery by six to nine months.

The government said the unemployment rate stood at 9.4 percent in July. Many economists expect it to hit double digits by early next year.

Analyst Jeffrey Donnelly, in a note to investors, said that net operating income, or income less operating expenses, could stay weak into next year. He cut his rating on Public Storage, which owns and operates self storage facilities, to "Market Perform" from "Outperform" and cut his estimates for funds from operations by 4 cents to $1.24 per share for the third quarter and to $1.22 per share from $1.27 per share for the fourth quarter.

FFO is an important real estate measure that adds depreciation and amortization expenses, as well as other non-operating items, back to net income.

Wall Street analysts expect, on average, FFO of $1.24 in the third quarter and $1.22 in the fourth.

Shares of the Glendale, Calif.-based Public Storage dropped $3.14, or 4.4 percent, to $68.35 in afternoon trading amid a broadly lower market. The Standard & Poor's 500 was down 2.1 percent recently.