Public Storage

Ladies and gentlemen, thank you for standing by, and welcome to the Public Storage Fourth Quarter 2021 Earnings Call. At this time, all participants have placed in a listen-only mode, and the floor will be open for your questions following the presentation. If you have a question at that time, please press star 1 on your telephone keypad. If you wish to remove yourself from the queue, please press the pound key. It is now my pleasure to turn the floor over to Ryan Burke, Vice President of Investor Relations. Ryan, you may begin.

Thank you, Catherine. Hello, everyone. Thank you for joining us for our fourth quarter 2021 earnings call. I'm here with Joe Russell and Tom Boyle. Before we begin, we want to remind you that certain matters discussed during this call may constitute forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are subject to certain economic risks and uncertainties. All forward-looking statements speak only as of today, February 23, 2022, and we assume no obligation to update, revise, or supplement statements. It could become untrue because of subsequent events. A reconciliation to GAAP of the non-GAAP financial measures we provide on this call is included in our earnings release. You can find our press release, supplement report, SEC reports, and an audio replay of this conference call on our website at publicstorage.com. We do ask that you initially limit yourself to two questions. Of course, feel free to jump back in queue with anything additional. With that, I'll turn the call over to Joe.

Thanks, Ryan. Good morning and thank you for joining us. I would like to begin the call by reviewing a few of the significant highlights from 2021 and then discuss our outlook for 2022. Last year, the public storage team unlocked opportunities in one of the most historically vibrant eras for the self-storage industry. Our priorities have included capturing excellent customer demand enhancing operations through the digitalization of our platform, acquiring individual assets and portfolios that provide outsized growth, and our ongoing investment in our people. On top of this, we have funded growth through a combination of exceptionally low-cost debt and preferred issuances, giving us significant firepower to expand the business going forward. There are four areas that were critical to our success in 2021, which have also set the stage for an equally, if not more powerful 2022. First, listening to our customers. We found innovative ways to solve what many new customers told us they wanted. A fast and efficient way to lease a storage space on their own timeframe. Through our eRental offering, approximately 50% of our new customers now self-select their space digitally. No operator in the industry comes close to this level of adoption. Our existing customers told us they wanted more tools to interface with public storage. This led to the full rollout of the PS app, which now has over 1 million downloads, offering an array of self-directed service options, including digital property access and account management. Second, driving our industry-leading four-factor growth platform. We acquired 232 assets, totaling 22 million square feet for approximately $5.1 billion, adding quality and scale to our market presence nationally. This included two $1.5 billion-plus portfolios, which were additive to our operating platform in the desirable markets of Washington, D.C. and Dallas-Fort Worth. Through development, the public storage real estate and construction teams grew our pipeline to approximately 800 million as we delivered Generation 5 properties to markets from coast to coast. And we added 79 assets across 22 states to our management platform with easy integration of both existing and newly built assets. Third, an ongoing commitment to invest in our people. In 2021, we increased hourly wages by 14%. We enhanced training to facilitate career progression with new positions in field operations. And recently, we were named by Forbes as one of America's best large employers. Then fourth, the effective utilization of our powerful balance sheet. We issued $5 billion of new debt instruments refinance $1.2 billion of preferred equity and took the overall blended cost of debt and preferred from 3.9% to 2.7%. As we enter 2022, the balance sheet is primed to fund growth. We have approximately $1 billion in cash and will likely generate another $700 million in free cash flow. Now, turning to this year, we have launched 2022 with a high degree of confidence that public storage is poised for another strong year. The components of our outlook are anchored by three areas. One, customer behavior has set the stage for another good, busy season. Through our own data, we see demand from both traditional and newer factors, including the fifth D, decluttering. Also, the high cost of housing, a strong economy, generational adoption of self-storage, and business users continue to create a vibrant customer acquisition and retention opportunity. Two, limited growth and new supply nationally. Our view is we are in a three-year holding pattern of new supply deliveries, which began in 2021. We are likely to see a range of five to 600 property deliveries take place annually through 2023 due to elevated risk tied to city approvals, higher component, labor, and land costs. And three, our commanding non-same store portfolio, which is now 25% of our total portfolio. With the investment activity in 2021, our non-same-store portfolio has grown significantly and is now comprised of 513 assets, approximately 50 million square feet, and has current occupancy of approximately 84%. The earnings power tied to this sizable asset base is significant and will likely continue. The portfolio is suited for outsized growth due to the quality of the assets, exceptional locations, and the lease-up activity we see as self-storage demand continues, particularly under the public storage brand. Now I'll turn the call over to Tom.