Public Storage Prices New Perpetual Issue

Storage REIT Public Storage (NYSE:PSA) has priced their new perpetual preferred issue and it sets a new record low coupon (for the time I have been watching–13 years) at 4.875%.

This low coupon is no real surprise given the super strong balance sheet the company possesses and the massive free cash the company generates.

Now we will await word from the company on a redemption for the 5.625% PSA-U issue. The size of this offering is not adequate for redeeming both the U issues and the 5.875% PSA-A issue in December so likely we will see another issue prior to that time.

The pricing term sheet can be read here.

15 thoughts on “Public Storage Prices New Perpetual Issue”

  1. I will pass on this issue also.

    The one thing about this extreme drop in rates is it makes less inclined to take profits in my preferreds that are trading very high. Probably a trap but we are in a period where normal rules do not seem to apply.

    Right now, my money market cash at 1.96% looks very good. Sure, the fed is likely to lower rates but if they do will we get at least a relief rally in long rates? We have 9 trading days to go until the next Fed rate decision.

    I this Public Storage was really smart to come to market ahead of this. This is really a well-run company

    1. SteveA, We’re pulling on the same oar. Preferreds I’d previously have sold at bloated prices I’m now holding, valuing the total return over the next bunch of years instead of 18 months of divvies today followed by an unknown. Also, my currently invested dollars have been pleading not to be sentenced to the 2% penalty bin – which if we believe the world-wide interest-rate trends, may soon be the 0.5% or lower penalty bin.

      Holding IG BBB or higher preferreds to maturity is likely to yield everything we signed up for at purchase. Maybe boring, but that was the original plan.

  2. PSA-U closed at 25.48 today which can be redeemed “at any time” on a minimum 30 days notice. Goes ex on 9-11 for 0.35. The 0.13 over the divi equates to about 33+ days dividend after the September 27 payable date. I assume PSA would calculate the final stub interest payment from the PAYABLE DATE on September 27 and NOT from the ex date???
    PSA-I, the new 4.875% preferred is expected to close on or about September 12. So the money to redeem will be available very soon.

    1. I am guessing they will announce the redemption notice on 9/12 right before the close of business (PST), so after the markets have closed.
      If history is any guide, the redemption date will be October 15, with a stub dividend of about $.058 a share for the accrued dividend from 10/1 to 10/15.
      The most recent redemptions all occurred simultaneous with the dividend payment, 2015 was the last time a redemption didn’t coincide with a dividend.
      This is the press release of the most recent off-cycle redemption showing the stub dividend is computed from the day after the dividend is payable.

      1. Thank you Justin. I agree with you. III shows PSA-U last trade today, September 9, at $25.49/share on a volume of 14,349 shares. If redeemed per your scenario, would result in a quick capital loss ($$$).

  3. Agreed. Rates fell very quickly and caught many investors (myself included) off guard. Doesn’t appear it takes very long to issue these securities so I wonder how underwriting fees will look by year-end? Pretty profitable?

    1. Bob, So true…and low though this coupon may be, last trade on 4.90% coupon PSA-E was 25.75 (25.46 stripped) with a non-QID YTC just under 4% until it’s 10.2021 call date.

      You have to laugh when remembering it was only 9-months ago term-dated were all the rage so we didn’t get trapped in those lowly 6% coupons.

      1. Will we in 9-months cry “how did I not purchase that beautiful 4.5% back in Sep 2019; the best I can get now is <3% ! " ?

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