Message #23 From:
NewsBot Date: April 2, 2007 01:34:00 PM
PSA News Fitch Affirms Public Storage, Inc. at 'A-'; Outlook Stable
NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed the ratings of Public Storage, Inc. (NYSE:PSA)('the company') and its affiliate Shurgard Storage Centers, Inc. (Shurgard) as follows:
Public Storage, Inc.
--Issuer Default Rating (IDR) at 'A-';
--Unsecured bank credit facilities at 'A-';
--Preferred securities at 'BBB+'.
Shurgard Storage Centers, Inc.
--IDR at 'A-';
--Senior unsecured notes at 'A-'.
Fitch's action affects approximately $3.8 billion in securities. The Outlook is Stable.
PSA's ratings are supported by the company's sizeable portfolio of over 2,100 self-storage facilities in 38 states within the U.S. and seven Western European countries. A regular preferred security issuer, Public Storage expanded its operating platform in August 2006 by acquiring Shurgard and currently owns more rentable square feet of self-storage properties than its public competitors.
The company's rating strengths include solid risk-adjusted capitalization, strong and consistent fixed charge coverage ratios, and an experienced management team. Fitch believes that Public Storage is amply capitalized on a risk-adjusted basis due to the leverageable nature of self-storage facilities as well as the high percentage of common equity and preferred security capital on PSA's balance sheet. Property occupancy and annualized rental income per available square foot levels (REVPAF), particularly in PSA's same-store portfolio, are good, contributing to consistent fixed charge coverage ratios. During the past four years, PSA's fixed charge coverage ratios were 2.9 times (x), 2.9x, 3.3x and 2.8x respectively, comparing favorably to similarly rated REITs.
Fitch's affirmation also reflects the company's financial flexibility provided by unencumbered assets and appropriate unencumbered asset coverage, with the gross book value of unencumbered assets covering unsecured debt and preferred securities by 2.6x as of December 31, 2006 and after giving effect to capital refinancings in 2007. Fitch acknowledges management's efforts to maintain a healthy unencumbered asset coverage cushion as well as management's experience and opportunism in the self-storage industry through economic cycles.
Limiting factors include a modest increase in secured debt, comprised of mortgage notes and European commercial mortgage backed securities, assumed in connection with the acquisition of 653 self-storage facilities from Shurgard. Although the company has prepaid a majority of secured debt in connection with the merger, PSA's secured debt level exceeds historical levels, placing bondholders and preferred security holders modestly subordinate in the capital structure.
Additionally, the ratings acknowledge lower occupancy levels in the Shurgard portfolio. PSA has made meaningful improvements leasing the Shurgard facilities since the merger closed in August 2006. However, occupancy at both U.S. and Europe-based Shurgard facilities is lower than occupancy in PSA's same-store portfolio. Finally, Fitch is cognizant of modest refinance risk evident in the company's debt maturity schedule, as over 20% of PSA's debt matures in 2008.
The Stable Outlook is reflective of the successful integration of Shurgard into Public Storage from a general and administrative cost standpoint. Moreover, the Outlook addresses the harmonization of Shurgard into PSA's 'Webchamp' operating platform, the re-branding of most Shurgard properties in the U.S., and the improvement of Shurgard portfolio property performance.
While Fitch's Outlook for PSA is Stable, Fitch is mindful that Public Storage is evaluating various financing alternatives to position Shurgard Europe for long-term sustained growth, including a possible initial public offering in Europe. Fitch views this consideration auspiciously.
An S&P 500 company, Public Storage is a fully integrated, self-administered and self-managed equity real estate investment trust headquartered in Glendale, CA, that primarily acquires, develops, owns, and operates self-storage facilities. As of December 31, 2006, Public Storage owned $11.3 billion in total book assets and had $8.2 billion in outstanding shareholders' equity.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
