Public Storage (PSA): A Great Place to Store Profits

First quarter FFO came in at $0.84, compared to $0.75 for the period last year. This comes as average occupancy was up to 87.4% from 82.1% for the same period last year, and despite average rental rates essentially being flat year-over-year. Going forward, Sovran might be disadvantaged when it comes to making strategic acquisitions  Where Public Storage has a debt-to-equity ratio of less than 2%, Sovran’s is close to 85%. However, Sovran did manage to recently open a new $175 million credit facility, but 2013 debt maturities will be higher than $100 million.

The billionaire hedge fund Capital Growth Management was one of Sovran’s top hedge fund shareholders (check out Heebner’s top stocks).

Public Storage’s little brother

PS Business Parks Inc (NYSE:PSB) focuses on office and industrial properties. PS Business saw occupancy in the first quarter of 2013 average 89.3%. Good news for PS is also good news for Public Storage; remember that Public Storage (NYSE:PSA) owns 41% of the REIT.

PS Business’ two markets, office and industrial, should both perform well with a rebounding economy, where demand will increase for office space and industry related activities. However, one potential headwind is that through 2014, 44% of its total rent income leases come up for renewal.

PS Business Parks also has one of the strongest balance sheets in the industry, with cash and cash equivalents of $12.9 million and $250 million under its unsecured credit facility. PS Business also has a solid ROE of 7.9%, although not quite as positive as Public Storage.

Going into 2013 there were only 12 hedge funds long the stock, a 9% increase from the previous quarter. Billionaire Jim Simons of Renaissance Technologies had the largest position in the stock (see RenTech’s top small cap picks).

Bottom line

Public Storage (NYSE:PSA) is the leader in the storage market and it pays an impressive 3.3% dividend yield. The REIT has been on a tear over the past few years, but there’s still room to move higher. With a leading position in the storage market, the company should preform well as the housing market rebound leads to increased occupancy.

The article A Great Place to Store Profits originally appeared on Fool.com and is written by Marshall Hargrave.

Marshall Hargrave has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Marshall is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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