PSA 3Q21 Preview: Best Idea Long PSA reports after the close tonight, and we are +$0.03/share ahead of Consensus with Core FFO of $3.27/share on SSRev up +12% and SSNOI up +16.5%. It makes sense for PSA to report lower growth metrics than EXR (+18.4% and +27.8% in 3Q, respectively), given the structural differences between the companies (larger size for PSA, different same store pool standards, etc.). PSA is the first self-storage REIT to follow up EXR's blowout report last week, and the reality is that anything less than a beat-and-raise in the quarter will be a disappointment. We are zooming in 5 things: (1) how large the lease roll-ups are following the first positive number in 2Q21 since 2015, (2) we would like to see the size of FY21 non-same store NOI contribution come up to our ~$260 million from the provided range of $225 to $240 million (relatively important metric for PSA's earnings growth trajectory), (3) whether year-end occupancy is trending higher vis-a-vis EXR, (4) commentary around staffing levels and underlying wage pressures, and (5) any view towards future property tax increases. These items will be most informative towards handicapping the RoC and how "long in the tooth" the long trade is.
CHART OF THE DAY: PSA "Street Rates" Have Converged to In-Place Rents
Source: Company Reports, Hedgeye.
O/VER Merger Close: Just a quick news item - Realty Income (O) closed its merger with Vereit, Inc. (VER) with VER holders receiving 0.705 shares of O. This creates the 6th largest REIT in the RMZ index by market cap, is +/-10% accretive to O's annual FFO/AFFO from day one, and creates a very interesting entity for us to follow closely in Quad 4 when the time comes. It is also important to note that the office assets of the combined company will be spun off into another REIT names Orion Office REIT (ONL) to be effected on 11/12.
Prior Notes:
10.31.21 - SUNDAY NIGHT REIT READ | 10.31.21 | (3Q21 EARNINGS SURPRISES, POSITION MONITOR)
10.28.21 - REIT RECAP | 10.28.21 | CPT 3Q21 RESULTS
10.28.21 - REITS DAILY BRIEF | 10.28.21 | (EXR)
10.28.21 - The Call | REITs | 10.28.21
10.28.21 - REIT RECAP | 10/28/21 | INVH 3Q21 RESULTS
10.28.21 - REIT RECAP | 10/27/21 | AVB 3Q21 RESULTS
10.27.21 - REITS DAILY BRIEF | 10.27.21 | (3Q21 Earnings, AVB, EXR, Office)
10.26.21 - REIT RECAP | 10/26/21 | EXR 3Q21 RESULTS
10.26.21 - REITS DAILY BRIEF | 10.26.21 | (EQR, REXR)
10.25.21 - SUNDAY NIGHT REIT READ | 10.24.21 | (POSITION MONITOR)
10.21.21. - REIT RECAP | 10/21/21 | REXR 3Q21 RESULTS
10.20.21 - REITS DAILY BRIEF | 10.20.21 | (EGP, PLYM, REXR, ILPT)
10.19.21 - VIDEO | American Homes 4 Rent (AMH) Thesis
10.19.21 - REITS DAILY BRIEF | 10.19.21 | (COLD, SLG, VNO, AMH, U.S. Office Utilization)
10.18.21 - REITS DAILY BRIEF | 10.18.21 | (PLD)
10.17.21 - SUNDAY NIGHT REIT READ | 10.17.21 | (PLD, POSITION MONITOR)
10.15.21 - REIT RECAP | 10/15/21 | PLD 3Q21 RESULTS
10.13.21 - REITS DAILY BRIEF | 10.13.21 | (PLD)
10.10.21 - SUNDAY NIGHT REIT READ | 10.10.21 | (POSITION MONITOR UPDATE)
10.8.21 - BLACK BOOK ROUND-UP | AMERCO (UHAL)
10.7.21 - BEST IDEA ROUND-UP | AMERICOLD REALTY TRUST (COLD)
Please e-mail with any questions.
Rob Simone, CFA
Managing Director
Twitter: @HedgeyeREITs
