Public Storage

Ladies and gentlemen, thank you for standing by, and welcome to the Public Storage Fourth Quarter and Full Year 2022 Earnings Call. At this time, all participants have been 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 star 2. It is now my pleasure to turn the floor over to Ryan Burke, Vice President of Investor Relations. Sir, you may begin.

Thank you, Chelsea. Hello, everyone. Thank you for joining us for our fourth quarter 2022 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 22nd, 2022, and we assume no obligation to update, revise, or supplement statements that may 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 reports, SEC reports, and an audio replay of this conference call on our website, publicstorage.com. We do ask that you initially limit yourself to two questions. Of course, after that, feel free to jump back in queue with additional questions. With that, I'll turn the call over to Joe.

Thank you, Ryan, and thank you for joining us. I'm going to begin by providing color on two recent announcements. We'll then move on to our performance in 2022 and outlook for 2023. First, on February 5th, we announced a 50% increase to our quarterly common dividend, a raise from $8 to $12 per share on an annualized basis. It is a result of a great effort by the team that has produced record performance over the last few years and a validation of our ongoing confidence in the strength of our platform. Second, as announced separately, we made a proposal to acquire life storage at a substantial premium after several attempts to engage in negotiations privately. I'd like to highlight a few important reasons why we why we think this combination is poised to unlock superior growth and value creation for shareholders. First, there is significant opportunity to accelerate growth and profitability as Life Storage's portfolio benefits from Public Storage's industry-leading brand. Our platform achieves approximately 80% same-store operating margins compared to Life Storage's margins at approximately 73%. And we see an opportunity to narrow that gap with their real estate assets as part of our industry-leading platform. Second, we believe there is significant upside to grow revenues and earnings in our respective ancillary business lines, including storage insurance, third-party property management, business customer offerings, and lending. Third, we see expanded portfolio growth opportunities as we leverage Public Storage's fully integrated in-house development team, the only one of its kind in the industry, to capitalize on additional development and redevelopment opportunities to enhance Life Storage's existing portfolio. And finally, all of this will be supported by an industry-leading balance sheet with low pro forma leverage, an advantage cost to capital, and significant capacity to fund future growth in conjunction with retained cash flow. Since announcing the proposal, we have received overwhelmingly positive feedback from both companies' shareholders who clearly recognize the significant benefits uniquely achievable through a combination with public storage. As you likely saw on February 16th, Life Storage issued its own press release rejecting our proposal. Nothing in that response changed our thinking. We have a high level of conviction in the strategic and financial merits, and we are committed to pursuing a potential combination. We are encouraged in that February 16th release, Life Storage indicated openness to opportunities to enhance shareholder value. We look forward to engaging in good faith discussions regarding a mutually agreeable combination. While we appreciate that analysts and shareholders have ongoing questions with respect to our proposal, the purposes of today's call is to discuss our fourth quarter earnings and our outlook for 2023. As such, we will not be addressing questions related to the proposal at this time. Now turning to our performance and outlook. 2022 was a year of milestones for public storage, including celebrating our 50th anniversary. The team and platform achieved record results in our same-store and non-same-store portfolios, elevating the customer experience through technology and operating model transformation, enhancing our properties through the Property of Tomorrow program, and growing the portfolio through acquisitions, development and redevelopment, and third-party management. We did all of this while maintaining the industry's best balance sheet which is poised to fund growth moving forward in conjunction with significant retained cash flow. To name just a few of our collective accomplishments. We achieved an 80% stabilized direct NOI margin through the combination of revenue generation and expense efficiency that only public storage is capable of. We grew beyond 200 million owned square feet and $4 billion in total revenues. We built our property development pipeline to approximately $1 billion. We received the prestigious Great Place to Work Award based on feedback provided directly by our employees. And we achieved top scoring U.S. self-storage REITs across the leading sustainability benchmarks. We are firing in all cylinders while strengthening the already formidable competitive advantages we have across our business. And those competitive advantages are heightened in the type of macro environment we are in today, on top of two consecutive years of record 20% plus core FFO growth. Simply put, we have the people, technologies, platforms, and brand which lead us to a position of strength in 2023. Demand for self-storage remains strong. as you see with our move in volume up more than 11% during the quarter. The aspects of the business that have historically made it resilient are on display. This is a needs-based business with demand drivers that are multidimensional and fluid throughout economic cycles. We also continue to benefit from a newer driver in the form of people spending more time at home, which has increasing permanence with remote and hybrid work here to stay. Our customer lengths of stay are at record levels. A positive trend given rent increases to existing customers are a key driver to our revenue growth. The outlook for new competitive supply is also in our favor. We are seeing less new property development nationally due to higher interest rates, cost pressures, difficult municipal processes, and concern over the macro landscape. With continuing strong demand, less pressure from new supply, and our numerous competitive advantages, we are very well positioned in 2023. Now I'll turn the call over to Tom.