• Core FFO per Share: $4.21 in Q4, a 20 basis point increase year over year.
• Same Store Revenue: Declined 60 basis points year over year in Q4, improving from a 130-basis-point decline in the prior quarter.
• Same Store Expenses: Increased 90 basis points year over year, driven by property taxes.
• Annual Retained Cash Flow: Expected to increase from $400 million in 2024 to approximately $600 million in 2025.
• Acquisition Activity: 26 properties acquired or under contract for $361 million in Q4.
• Development Pipeline: $740 million to be delivered over the next two years.
• Digital Transformation: 85% of customer interactions and transactions are digital, up from 30% in 2019.
• Solar Program: Implemented in nearly 900 properties, resulting in a 30% reduction in utility use.
• 2025 Core FFO per Share Guidance: $16.35 to $17, with a midpoint consistent with 2024.
• Same Store NOI: Expected to decline 1.4% at the midpoint in 2025.
• Non-Same Store Portfolio NOI: $454 million assumed at the midpoint for 2025.

• Warning! GuruFocus has detected 4 Warning Sign with PSA.

Release Date: February 25, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• $Public Storage(PSA-N)$ (NYSE:PSA) ended 2024 on a positive note with broad operational stabilization across nearly all markets.
• Quarterly same store revenue growth improved sequentially for the first time in over two years.
• The Property of Tomorrow program, a $600 million investment, was completed, enhancing brand positioning and expected to increase annual retained cash flow significantly.
• Digital transformation has advanced, with 85% of customer interactions now digital, leading to a 30% reduction in on-property labor hours.
• The solar program has reached nearly 900 properties, resulting in a 30% reduction in utility use, benefiting both financials and the environment.

Negative Points

• Same store revenues declined 60 basis points year over year in the fourth quarter.
• Los Angeles market faces challenges due to pricing restrictions from a state of emergency, impacting revenue by an estimated 100 basis points.
• Move-in rents are expected to be down 5% year over year on average in 2025.
• Occupancy is projected to be down 10 basis points on average, reflecting ongoing competitive dynamics.
• Same store NOI is expected to decline by 1.4% at the midpoint due to increased property taxes and other expenses.

Q & A Highlights

Q: Can you elaborate on the assumptions for street rates and occupancy for 2025? A: H. Thomas Boyle, CFO, explained that they expect move-in rents to be down 5% on average for 2025, which is an improvement from the start of the year where rents were down 8%. Occupancy is expected to be down 10 basis points on average, indicating a stabilization in demand. The assumptions are based on competitive dynamics and demand stabilization observed at the start of the year.

Q: What is driving the broader market stabilization and inflection in almost all markets? A: Joseph Russell, CEO, noted that the stabilization is driven by moderate but improving market-to-market demand factors and a decline in new supply. They are seeing improved top-of-funnel demand and effective conversion techniques, which are contributing to the stabilization across their portfolio.

Q: Can you discuss the impact of the Los Angeles state of emergency on your revenue and assumptions for 2025? A: H. Thomas Boyle, CFO, stated that the state of emergency in Los Angeles and Ventura Counties results in a 10% pricing restriction, leading to an estimated 100 basis point negative impact on same-store revenue for 2025. The impact will accumulate throughout the year, primarily affecting rent pricing.

Q: What are the trends in the Sun Belt compared to coastal and urban markets? A: H. Thomas Boyle, CFO, mentioned that while the Sun Belt experienced a greater deceleration, they are seeing encouraging trends in some Florida markets like Miami and Orlando. Coastal markets like Seattle, San Francisco, and DC have shown improvement, and they expect continued stabilization across these regions.

Q: What is driving the increased acquisition activity in 2025, and where are cap rates settling? A: H. Thomas Boyle, CFO, explained that acquisition activity is expected to increase due to improved fundamentals and a decline in new supply. Cap rates are generally in the 5% to 6% range for stabilized properties, with lease-up assets differing slightly. The market is seeing more one-off transactions rather than large portfolios.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.