Public Storage Reports Results for the Three and Six Months Ended June 30, 2021

Public Storage (NYSE:PSA) announced today operating results for the three and six months ended June 30, 2021.

Highlights for the Three Months Ended June 30, 2021

• Reported net income allocable to common shareholders of $1.97 per diluted share.

• Reported core FFO allocable to common shareholders (“Core FFO”) of $3.15 per diluted share, an increase of 28.0% relative to the same period in 2020.

• Increased Same Store (as defined below) direct net operating income by 20.8%, resulting from a 10.8% increase in Same Store revenues and a 15.9% decrease in Same Store direct cost of operations.

• Achieved 79.4% Same Store direct net operating income margin, an increase of 4.9% relative to the year ended December 31, 2020.

• Acquired 84 self-storage facilities with 7.0 million net rentable square feet for $2.3 billion. This acquisition activity was funded by the largest bond issuance in company history totaling $2.0 billion at a weighted average annual rate of 1.6%. Subsequent to June 30, 2021, we acquired or were under contract to acquire 36 self-storage facilities across 15 states with 3.0 million net rentable square feet, for $466.6 million.

• Opened two newly developed facilities and various expansion projects with 0.3 million net rentable square feet costing $40.2 million. At June 30, 2021, we had various facilities in development and expansion with 4.3 million net rentable square feet estimated to cost $661.0 million.

• Refinanced $525.0 million of 5.02% weighted average preferred equity with $604 million of 4.00% preferred equity, continuing to lower our in place cost of capital.

Operating Results for the Three Months Ended June 30, 2021

For the three months ended June 30, 2021, net income allocable to our common shareholders was $346.2 million or $1.97 per diluted common share, compared to $246.1 million or $1.41 per diluted common share in 2020 representing an increase of $100.1 million or $0.56 per diluted common share. The increase is due primarily to (i) a $126.8 million increase in self-storage net operating income (described below), (ii) a $11.4 million increase due to equity in earnings of unconsolidated real estate entities, partially offset by (iii) a $35.1 million increase in depreciation and amortization expense and (iv) a $10.6 million increase in general and administrative expense due primarily to increased share-based compensation expense.

The $126.8 million increase in self-storage net operating income is a result of a $91.6 million increase in our Same Store Facilities, and a $35.2 million increase in our Non-Same Store Facilities (as defined below). Revenues for the Same Store Facilities increased 10.8% or $66.4 million in the three months ended June 30, 2021 as compared to 2020, due primarily to higher realized annual rent per available square foot and weighted average square foot occupancy. Cost of operations for the Same Store Facilities decreased by 13.1% or $25.2 million in the three months ended June 30, 2021 as compared to 2020, due primarily to a 33.7% ($13.1 million) decrease in on-site property manager payroll resulting from a temporary $3.00 hourly incentive increase and enhancement of paid time off benefits to all of our property managers between April 1, 2020 and June 30, 2020 during the COVID-19 Pandemic (the "COVID Pandemic”), a 61.2% ($10.8 million) decrease in marketing expenses, and a change in property tax timing contributing to our 7.3% ($5.3 million) decrease in property tax expense. The increase in net operating income of $35.2 million for the Non-Same Store Facilities is due primarily to the impact of facilities acquired in 2020 and 2021 and the fill-up of recently developed and expanded facilities.

Operating Results for the Six Months Ended June 30, 2021

For the six months ended June 30, 2021, net income allocable to our common shareholders was $732.1 million or $4.18 per diluted common share, compared to $559.3 million or $3.20 per diluted common share in 2020 representing an increase of $172.8 million or $0.98 per diluted common share. The increase is due primarily to (i) a $167.9 million increase in self-storage net operating income (described below), (ii) a $43.0 million increase due to the impact of foreign currency exchange gains and losses associated with our Euro denominated debt, partially offset by (iii) a $46.1 million increase in depreciation and amortization expense and (iv) a $12.3 million increase in general and administrative expense due primarily to increased share-based compensation expense.

The $167.9 million increase in self-storage net operating income is a result of a $120.9 million increase in our Same Store Facilities (as defined below), and a $47.0 million increase in our Non-Same Store Facilities (as defined below). Revenues for the Same Store Facilities increased 7.1% or $87.5 million in the six months ended June 30, 2021 as compared to 2020, due primarily to higher realized annual rent per available square foot and weighted average square foot occupancy. Cost of operations for the Same Store Facilities decreased by 8.7% or $33.3 million in the six months ended June 30, 2021 as compared to 2020, due primarily to a 24.3% ($17.4 million) decrease in on-site property manager payroll resulting from a temporary $3.00 hourly incentive increase and enhancement of paid time off benefits to all of our property managers between April 1, 2020 and June 30, 2020 during the COVID Pandemic, a change in property tax timing contributing to a 7.9% ($11.5 million) decrease in property tax expense, and a 34.0% ($11.0 million) decrease in marketing expenses. The increase in net operating income of $47.0 million for the Non-Same Store Facilities is due primarily to the impact of facilities acquired in 2020 and 2021 and the fill-up of recently developed and expanded facilities.

Funds from Operations

For the three months ended June 30, 2021, funds from operations (“FFO”) was $2.99 per diluted common share, as compared to $2.28 in the same period in 2020, representing an increase of 31.1%. FFO is a non-GAAP measure defined by the National Association of Real Estate Investment Trusts and generally represents net income before depreciation and amortization expense, gains and losses and impairment charges with respect to real estate assets. A reconciliation of GAAP diluted net income per share to FFO per share, and additional descriptive information regarding this non-GAAP measure, is attached.

For the six months ended June 30, 2021, FFO was $6.07 per diluted common share, as compared to $4.90 in the same period in 2020, representing an increase of 23.9%.

We also present “Core FFO per share,” a non-GAAP measure that represents FFO per share excluding the impact of (i) foreign currency exchange gains and losses, (ii) charges related to the redemption of preferred securities, and (iii) certain other non-cash and/or nonrecurring income or expense items primarily representing, with respect to the periods presented below, the impact of casualties, and due diligence costs incurred in strategic transactions. We review Core FFO per share to evaluate our ongoing operating performance, and we believe it is used by investors and REIT analysts in a similar manner. However, Core FFO per share is not a substitute for net income per share. Because other REITs may not compute Core FFO per share in the same manner as we do, may not use the same terminology, or may not present such a measure, Core FFO per share may not be comparable among REITs.

The following table reconciles from FFO per share to Core FFO per share (unaudited):

Property Operations – Same Store Facilities

The Same Store Facilities consist of facilities that have been owned and operated on a stabilized level of occupancy, revenues, and cost of operations since January 1, 2019. The composition of our Same Store Facilities allows us to more effectively evaluate the ongoing performance of our self-storage portfolio in 2019, 2020, and 2021 and exclude the impact of fill-up of unstabilized facilities, which can significantly affect operating trends. We believe the Same Store information is used by investors and analysts in a similar manner. However, because other REITs may not compute Same Store Facilities in the same manner as we do, may not use the same terminology, or may not present such a measure, Same Store Facilities may not be comparable among REITs. The following table summarizes the historical operating results of these 2,278 facilities (148.9 million net rentable square feet) that represent approximately 81% of the aggregate net rentable square feet of our U.S. consolidated self-storage portfolio at June 30, 2021 (unaudited):

The following table summarizes selected quarterly financial data with respect to the Same Store Facilities (unaudited):

Property Operations – Non-Same Store Facilities

In addition to the 2,278 Same Store Facilities, we have 371 facilities that were not stabilized with respect to occupancies, revenues, or cost of operations since January 1, 2019 or that we did not own as of January 1, 2019, including 205 facilities that were acquired, 67 newly developed facilities, 71 facilities that have been expanded or are targeted for expansion, and 28 facilities that are unstabilized due to the impact of casualties and other factors (collectively, the “Non-Same Store Facilities”). Operating data, metrics, and further commentary with respect to these facilities, including detail by vintage, are included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under “Self-Storage Operations” in our June 30, 2021 Form 10-Q.

Investing and Capital Activities

During the three months ended June 30, 2021, we acquired 84 self-storage facilities (39 in Maryland, 11 in Virginia, six in Idaho, four in Indiana, three each in Florida, Nebraska, and Texas, two each in Arizona, California, Georgia and Washington, and one each in Colorado, Illinois, Kansas, North Carolina, Ohio, Pennsylvania and South Carolina,) with 7.0 million net rentable square feet for $2.3 billion. During the six months ended June 30, 2021, we acquired 99 self-storage facilities (39 in Maryland, 12 in Virginia, six in Idaho, five in Arizona, four each in California, Indiana and Nebraska, three each in Florida, North Carolina, South Carolina and Texas, two each in Washington, Louisiana, Ohio and Georgia, and one each in Colorado, Illinois, Kansas, Nevada and Pennsylvania) with 8.1 million net rentable square feet for $2.5 billion.

The preceding discussion of properties acquired, includes our acquisition of the ezStorage portfolio on April 28, 2021, consisting of 48 properties (4.1 million net rentable square feet) for an acquisition cost of $1.8 billion, which includes 47 self-storage facilities and a property that is under construction. For the quarter ended June 30, 2021, these facilities generated revenues of $14.8 million, NOI of $11.6 million (including Direct NOI of $12.0 million) and square footage occupancy at quarter end was 94.2%.

Subsequent to June 30, 2021, we acquired or were under contract to acquire 36 self-storage facilities across 15 states with 3.0 million net rentable square feet, for $466.6 million.

During the three months ended June 30, 2021, we opened two newly developed facilities and various expansion projects (0.3 million net rentable square feet with 0.2 million in Florida and 0.1 million in Colorado) costing $40.2 million. During the six months ended June 30, 2021, we opened three newly developed facilities and various expansion projects (0.5 million net rentable square feet - 0.2 million each in Virginia and Florida and 0.1 million in Colorado) costing $85.6 million. At June 30, 2021, we had various facilities in development (1.9 million net rentable square feet) estimated to cost $308 million and various expansion projects (2.4 million net rentable square feet) estimated to cost $353 million. Our aggregate 4.3 million net rentable square foot pipeline of development and expansion facilities includes 1.0 million each in California and Florida, 0.4 million Maryland, 0.3 million each in New Jersey and Washington, 0.2 million each in Michigan, Minnesota, New York, and Texas and 0.5 million in other states. The remaining $411 million of development costs for these projects is expected to be incurred primarily in the next 18 to 24 months.

On June 16, 2021, we issued our 4.000% Series P Preferred Shares for gross proceeds of $604 million.

On June 18, 2021, we called for redemption, and on July 20, 2021 we redeemed, our 4.950% Series D Preferred Shares for $325 million, plus accrued dividends.

On June 30, 2021, we redeemed our 5.125% Series C Preferred Shares for $200 million.

Distributions Declared

On July 28, 2021, our Board of Trustees declared a regular common quarterly dividend of $2.00 per common share. The Board also declared dividends with respect to our various series of preferred shares. All the dividends are payable on September 30, 2021 to shareholders of record as of September 15, 2021.

Outlook for the Twelve Months Ending December 31, 2021

The following table outlines the Company’s Core FFO per share estimate and certain underlying assumptions for the year ending December 31, 2021:

Forward-looking Core FFO per share measures exclude estimates for the impact of (i) foreign currency exchange gains and losses, (ii) charges related to the redemption of preferred securities, and (iii) certain other significant non-cash and/or nonrecurring income or expense items such as loss contingency accruals, casualties, transactional due diligence, and advisory costs. Public Storage is unable to provide a reconciliation of Core FFO per share guidance measures to corresponding U.S. GAAP measures on forward-looking basis without unreasonable effort due to the overall high variability of most of the foregoing items that have been excluded. The items that are being excluded are difficult to predict and a reconciliation could result in disclosure that would be imprecise or potentially misleading. Material changes to any one of these items could have a significant effect on our guidance and future U.S. GAAP results.

Second Quarter Conference Call

A conference call is scheduled for August 4, 2021 at 9:00 a.m. (PDT) to discuss the second quarter earnings results. The domestic dial-in number is (866) 406-5408, and the international dial-in number is (973) 582-2770 (conference ID number for either domestic or international is 2088572). A simultaneous audio webcast may be accessed by using the link at www.publicstorage.com under “About Us, Investor Relations, News and Events, Event Calendar.” A replay of the conference call may be accessed through August 18, 2021 by calling (800) 585-8367 (domestic), (404) 537-3406 (international) or by using the link at www.publicstorage.com under “About Us, Investor Relations, News and Events, Event Calendar.” All forms of replay utilize conference ID number 2088572.

About Public Storage

Public Storage, a member of the S&P 500 and FT Global 500, is a REIT that primarily acquires, develops, owns and operates self-storage facilities. At June 30, 2021, we had: (i) interests in 2,649 self-storage facilities located in 39 states with approximately 184 million net rentable square feet in the United States, (ii) an approximate 35% common equity interest in Shurgard Self-Storage SA (Euronext Brussels:SHUR) which owned 243 self-storage facilities located in seven Western European nations with approximately 13 million net rentable square feet operated under the “Shurgard” brand and (iii) an approximate 42% common equity interest in PS Business Parks, Inc. (NYSE:PSB) which owned and operated approximately 28 million rentable square feet of commercial space at June 30, 2021. Our headquarters are located in Glendale, California.

This press release, our Form 10-Q for the second quarter of 2021, and additional information about Public Storage are available on our website, www.publicstorage.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include statements relating to our 2021 outlook and all underlying assumptions, our expected acquisition, disposition, development and redevelopment activity, supply and demand for our self-storage facilities, information relating to operating trends in our markets, expectations regarding operating expenses, including property tax changes, our strategic priorities, expectations with respect to financing activities, rental rates, cap rates and yields, leasing expectations, our credit ratings, and all other statements other than statements of historical fact. Such statements are based on management’s beliefs and assumptions made based on information currently available to management. All statements in this press release, other than statements of historical fact, are forward-looking statements which may be identified by the use of the words “outlook,” “guidance,” “expects,” “believes,” “anticipates,” “should,” “estimates,” and similar expressions. These forward-looking statements involve known and unknown risks and uncertainties, which may cause our actual results and performance to be materially different from those expressed or implied in the forward-looking statements. Factors and risks that may impact future results and performance include, but are not limited to, those described in Part 1, Item 1A, “Risk Factors” in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on February 24, 2021 and in our other filings with the SEC including: general risks associated with the ownership and operation of real estate, including changes in demand, risk related to development, expansion and acquisition of self-storage facilities, potential liability for environmental contamination, natural disasters and adverse changes in laws and regulations governing property tax, real estate and zoning; risks associated with downturns in the national and local economies in the markets in which we operate, including risks related to current economic conditions and the economic health of our customers; risks associated with the COVID-19 Pandemic (the "COVID Pandemic”) or similar events, including but not limited to illness or death of our employees or customers, negative impacts to the economic environment and to self-storage customers which could reduce the demand for self-storage or reduce our ability to collect rent, and/or potential regulatory actions to (i) close our facilities if we were determined not to be an “essential business” or for other reasons, (ii) limit our ability to increase rent or otherwise limit the rent we can charge or (iii) limit our ability to collect rent or evict delinquent tenants; the risk that there could be an out-migration of population from certain high-cost major markets, if it is determined that the ability to “work from home,” which has become more prominent during the COVID Pandemic, could allow certain workers to live in less expensive localities, which could negatively impact the occupancies and revenues of our properties in such major high-cost markets; the risk that more jurisdictions will reinstitute COVID Pandemic restrictions, which were previously eased, in response to increases in infections, including as a result of variants such as the Delta variant, or if additional pandemics occur; the risk that we could experience a change in the move-out patterns of our long-term customers due to economic uncertainty and the increases in unemployment resulting from changes in the macro environment, which could lead to lower occupancies and rent “roll down” as long-term customers are replaced with new customers at lower rates; risk of negative impacts on the cost and availability of debt and equity capital as a result of the COVID Pandemic, which could have a material impact upon our capital and growth plans; the impact of competition from new and existing self-storage and commercial facilities and other storage alternatives; the risk that our existing self-storage facilities may be at a disadvantage in competing with newly developed facilities with more visual and customer appeal; risks related to increased reliance on Google and Sparefoot as customer acquisition channels; difficulties in our ability to successfully evaluate, finance, integrate into our existing operations and manage properties that we acquire directly or through the acquisition of entities that own and operate self-storage facilities or to consummate announced acquisitions in the expected timeframe or at all; risks associated with international operations including, but not limited to, unfavorable foreign currency rate fluctuations, changes in tax laws and local and global economic uncertainty that could adversely affect our earnings and cash flows; risks related to our participation in joint ventures; the impact of the legal and regulatory environment, as well as national, state and local laws and regulations including, without limitation, those governing environmental issues, taxes, our tenant reinsurance business, and labor, including risks related to the impact of new laws and regulations; risks of increased tax expense associated either with a possible failure by us to qualify as a REIT, or with challenges to the determination of taxable income for our taxable REIT subsidiaries; risks due to ballot initiatives or other actions that could remove the protections of Proposition 13 with respect to our real estate and result in substantial increases in our assessed values and property tax bills in California; changes in United States federal or state tax laws related to the taxation of REITs and other corporations; security breaches, including ransomware, or a failure of our networks, systems or technology could adversely impact our operations or our business, customer and employee relationships or result in fraudulent payments; risks associated with the self-insurance of certain business risks, including property and casualty insurance, employee health insurance and workers compensation liabilities; difficulties in raising capital at a reasonable cost; delays and cost overruns on our projects to develop new facilities or expand our existing facilities; difficulties in our ability to hire and retain skilled management and staff; ineffective succession planning for our CEO, executive management and our other key employees; ongoing litigation and other legal and regulatory actions which may divert management’s time and attention, require us to pay damages and expenses or restrict the operation of our business; and economic uncertainty due to the impact of war or terrorism. These forward-looking statements speak only as of the date of this press release. All of our forward-looking statements, including those in this press release, are qualified in their entirety by this statement. We expressly disclaim any obligation to update publicly or otherwise revise any forward-looking statements, whether because of new information, new estimates, or other factors, events or circumstances after the date of these forward-looking statements, except when expressly required by law. Given these risks and uncertainties, you should not rely on any forward-looking statements in this press release, or which management may make orally or in writing from time to time, neither as predictions of future events nor guarantees of future performance.

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