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Public Storage (PSA)

Q4 2011 Earnings Call

February 24, 2012 1:00 pm ET


Clemente Teng - Vice President of Investor Services

John Reyes - Chief Financial Officer, Principal Accounting Officer and Senior Vice President

Ronald L. Havner - Chairman, Chief Executive Officer and President

David F. Doll - Senior Vice President and President of Real Estate Group


Christy McElroy - UBS Investment Bank, Research Division

Michael Knott - Green Street Advisors, Inc., Research Division

Michael W. Mueller - JP Morgan Chase & Co, Research Division

Ki Kim

Swaroop Yalla - Morgan Stanley, Research Division

Todd M. Thomas - KeyBanc Capital Markets Inc., Research Division

Michael J. Salinsky - RBC Capital Markets, LLC, Research Division

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Ladies and gentlemen, thank you for standing by, and welcome to the Public Storage Fourth Quarter 2011 Earnings Call. [Operator Instructions] I would now like to turn the conference over to Mr. Clem Teng. Sir, you may begin your conference.

Clemente Teng

Good morning, and thank you for joining us for our fourth quarter earnings call. Here with me today are Ron Havner and John Reyes. All statements, other than statements of historical facts included in this conference call, are forward-looking statements, subject to a number of risks and uncertainties that could cause actual results to differ materially from those projected in these statements. These risks and other factors that could adversely affect our business and future results are described in today's earnings press release and in our reports filed with the SEC. All forward-looking statements speak only as of February 24, 2012, and we assume no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. A reconciliation to GAAP of the non-GAAP financial measures we are providing on this call is included in our earnings press release. You can find our press release, SEC reports and an audio webcast replay of this conference call on our website, at

Now I'll turn the call over to John Reyes.

John Reyes

Thank you, Clem. Our fourth quarter core FFO per share was $1.66 compared to $1.45 last year, a 15% increase. Five items contributed to this growth: First, our same-store net operating income increased by 6.1%, adding $0.09 per share; nonsame-store properties provided $0.03 per share; buying affiliated partnership interest in the third quarter added $0.02; our investment in Shurgard Europe added $0.02 per share, driven primarily by Shurgard's first quarter acquisition of the remaining interest in 2 joint ventures; and lower financing cost added $0.05 per share. We recently completed several capital transactions in the first quarter. We issued $460 million of 5.9% preferred stock, a record low coupon rate for us. We also announced the redemption of 3 preferred series totaling $357 million, having a blended rate of 6.75%. There will be a charge recorded in the first quarter associated with redemptions of about $13 million or $0.08 per share.

As a result of recent capital transactions, preferred dividends are expected to be about $4 million lower in the first quarter. In November, Shurgard Europe completed the refinancing of its joint venture loans with a new EUR 215 million term loan. This new loan, which will mature in November of 2014, has an interest rate of about 125 basis points lower than the joint venture loans. We also extended the maturity date of our 9% loan to Shurgard Europe to February 2015. We expect nominal paydowns on our loan in 2012. We increased our quarterly dividend to $1.10 per share, representing an increase of 16%. Since 2007, our dividend has more than doubled. Our consistent long-term dividend policy has been to distribute only our taxable income.

With that, I will now turn it over to Ron.

Ronald L. Havner

Thank you, John. The fourth quarter benefited from higher occupancy and better pricing. Our same-store movements were up 2% year-over-year in the quarter, offset by higher move-outs of 3%. By the end of January 2012, occupancy, in-place rents and asking rents were all higher than the same period last year. In Q4, all of our markets achieved positive revenue growth. The Detroit and Dallas markets led the country, with growth of about 8%. Los Angeles, our largest market, grew by 3%. San Francisco, our second largest market, increased by 5.4%, and the northeast markets grew by 6.1%. Given these positive trends in occupancies and rates, we expect our Q1 media spend will be about $1 million lower. Overall, we had a solid 2011. Our same-store properties generated NOI growth of 6% and we achieved record high occupancies of 91.1% for the year. We acquired about $500 million of various property interests and reduced leverage both debt and preferred by another $500 million. We have positive momentum going into 2012.

With that, operator, let's open it up for questions.

Question-and-Answer Session


[Operator Instructions] Your first question comes from the line of Christy McElroy of UBS.

Christy McElroy - UBS Investment Bank, Research Division

I realize that you wouldn't give specific guidance on this, but I'm wondering, given the fundamental trends appear to be slowing in the European portfolio, I'm wondering if you could talk about expectations for performance this year? Do you think that revenue growth can remain positive in 2012? And can you talk about the success that you've had pushing existing customer rents in Europe versus what you've been able to do in the U.S.?

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