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Public Storage's Earnings Rise 4%

The industry leader says new business resulting from discounting and advertising helped its second-quarter profit.

August 06, 2003|Karen Robinson-Jacobs | Times Staff Writer

Aggressive discounting and a nationwide advertising campaign helped attract enough new business to boost Public Storage Inc.'s second-quarter earnings by 4%, the company said Tuesday.

The Glendale-based real estate investment trust, which rents out storage units in 37 states, saw net income for the period ended June 30 rise to $84.3 million, up from $80.7 million in the same period a year earlier.

Public Storage's funds from operations, one of Wall Street's key measures of profitability for REITs, were $90.7 million, or 72 cents a common share, up 3% from the $87.9 million, or 70 cents, posted a year ago. The results beat analysts' consensus estimate of 68 cents, according to a Thomson First Call survey.

To track changes over time, the company compares the performance of 1,257 of its facilities. Rental income for the group, adjusted down to account for discounts, was $175 million in the quarter, up 2% from $172 million a year ago.

Revenue in the latest quarter rose 5% to $218.9 million, up from $208 million a year earlier.

Though still by far the largest player in the self-storage industry, with about 1,400 facilities nationwide, Public Storage finds itself in an increasingly competitive marketplace.

The number of storage facilities in the U.S. has shot up by more than 60% in the last decade to more than 35,000 properties, according to MiniCo Inc.'s Self-Storage Almanac.

This year the company has spent $25 million on promotional discounts, and in the second quarter it almost doubled television ad spending to $2.9 million. That's one reason Public Storage's net operating income for sites open at least a year fell 3% in the second quarter, compared with a year ago.

Company President Harvey Penkin on Tuesday reiterated that cut-rate deals and heavier TV spending would continue for the rest of 2003.

Analysts said there were signs that the moves were helping the company gain ground. Public Storage's average square-foot occupancy for the second quarter rose to 89.2%, up from 86.4% a year ago.

The company "has made progress improving its occupancy levels, but that has come at a cost," said Jim Sullivan, a senior analyst with Newport Beach-based Green Street Advisors.

Public Storage released its results after the markets closed.

Shares of Public Storage fell 21 cents Tuesday to close at $35.60 on the New York Stock Exchange. The shares have climbed 10% this year.

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