Public Storage Prices New Preferred

Public Storage (NYSE:PSA) has priced their new preferred issue with a fixed rate coupon of 5.60%.

Of course the issue is perpetual, cumulative and NON qualified.

The issue is strongly investment grade with a rating of BBB+ from S&P and A3 from Moodys.

They will sell 11.4 million shares. The optional redemption period starts 3/11/2024.

The pricing term sheet can be read here.

PSA has 12 other preferred issues outstanding with coupons ranging from a low of 4.90% to a high of 6%.

The new issue will trade with the permanent ticker symbol of PSA-H when trading hits the big board.

The issue will trade immediately on the OTC Grey market under the ticker of PSALL.

28 thoughts on “Public Storage Prices New Preferred”

  1. Again Tim, as I also wrote on the earlier thread, are you saying that PSA only sells preferreds to give them a place to “get rid of” their income? Instead of putting it all into the common dividend? That is a new concept to me and I’d like to understand it better.

    1. Hi Larry–yes I am. For whatever reason they have chosen to finance the business with preferred equity to a large degree. They have a current yield of just 3.78% on the common so certainly could raise that dividend quite sharply if they desired.

  2. Hmmm…. at 5.6% for the new issue there’s no chance they won’t call my PSA-Z at 6%. The good news is a call in June gives me a 12% YTC (yield to call). The bad news… I’m going to have to find a home for too much money this year with what is shaping up to be too little return on offer per unit of risk. I’m getting really, really, really tired of the yield compression treadmill.

    1. The IPO of PSA-H is 11.4M shares. Combined shares of PSA-Y and PSA-Z are 19M – so insufficient funds raised to redeem both issues. At least not with funds from the IPO by itself

      If they can get additional funds from other sources, then that would be a game changer.

    2. How do you get 12% YTC for PSA-Z? It’s trading at $25.63, and two divs (March and June) only total $0.75.

      1. Purchased on 12/18/18 for $24.88. Currently 26 cents in accrued interest. The excel formula formula is =IFERROR(YIELD(A1+2,B1,C1,D1*(100/E1),100,4,0),”NA”)

        A1= Todays Date [3/1/19]
        B1 = Call Date [6/4/19]
        C1 = Coupon [6%]
        D1 = Price Paid adjusted for accrued interest [$24.62]
        E1 = Par [$25]

        1. The YTC would utilize an =XIRR calc reflecting today’s price, divvy, date/amount of periodic pymts and call price. The June 4 YTC for PSA-Z is 0.18%. Blue like you said that’s some serious yield compression. Though based on Tim’s and inspbudget’s observations re PSA’s use of capital, appears a low call probability.

          1. You get the same result with the YIELD formula (as I laid it out). The price I paid creates a “price adjusted for accrued interest” of $24.61 & YTC of 12.47%. ON THE OTHER HAND if you buy at the current price $25.63 the “price adjusted for accrued interest” is $25.36 & YTC comes in as you say, almost zero.

            But as Joel A. channeling GNR nasaled out “All we need is just a little patience”. But I can’t help whining out

            “Shed a tear ’cause I’m missin’ you
            I’m still alright to smile
            Yield, I think about you every day now
            Was a time when I wasn’t sure
            But you set my mind at ease
            There is no doubt you’re in my heart now”

    3. Your patience may be rewarded! I’m selling off other LT assets and looking for a home for new funds too with less management AND QDI. I must have 20 open buy orders on qual stuff. I know they are seen as put insurance by some of the churn jockeys, but there is no replacement for having the ability to pounce when the opp arises!
      I think I’ll get a grey day nap in this afternoon.

        1. Joel, I know its not for everyone, but being a churn jockey has been working spades for me…Really for 6 years running now. For example I just repurchased NI-B for the 3rd time today since issuance at $26.46. Not thinking its a steal here and may still be high. But I originally bought with intent as long term hold but was caught off guard by the pricing spikes. My two sells have lowered my cost basis down to $23.88 already if one wants to think that way, plus the divi was captured too. There are a couple sister issues I have been buying and selling 4 different times off 40-50 cent spikes past couple weeks. Buy into liquidity and sell into illiquidity. But staying in ones lane is paramount doing this though.

          1. I totally get that trading and averaging. I’m referring to the put insurance on thinly traded shares for those who will buy but keep their finger over the sell button if there is ANY capital loss. Prefs a different, thinner ‘trading’ game. I know you remember times when sell algos triggered sells in rapid order. I’ll take my open buys at the price I ‘put-out-there’ if that wants to happen.
            PS Comment on my rationale: I don’t have a lot of faith the Fed is NOT going to keep their course selling which inches rates up with a concerned grimace until there is some sort of trigger realized sooner or later, hence my open buy orders.
            Happy Day to All!

            1. Ok, I see. No I am out on an island when I go in. My last thought before I buy (well not counting RLJ-A, lol) is if it drops will I still be comfortable knowing the divi or company is not at risk. For example, I am not convinced NI-B wont drop some more. But I got my cost basis down so low now from trading and I do want it as a core, so I am fine with it sagging some more and hold it.

  3. Is this is rated AAA++++ by Egan Jones? THEY are the authority on inflated ratings…

    1. I’ve seen this reference to “Egan Jones” on several threads.

      Please keep in mind that this site has readers of a wide variety of sophistication. I mean, I consider myself fairly knowledgeable, but not nearly enough to get all the inside jokes. As a result, I have no idea what you’re trying to say. As far as I know, PSA preferreds are pretty highly rated. Are you complaining that they don’t pay enough? Or about something else? I just don’t know.

      1. Hi Larry–I think Nomad was just making a joke of sorts. Egan Jones rates a lot of the marginal issues and somehow they come up with a lot of “A” ratings.

        1. Thanks Tim. I was just trying to point out that my decoder ring doesn’t always pick up all the hidden messages in the comments.

            1. Has Egan Jones commented or rated the PSA preferreds? Are they in any way RELEVANT to this post?

                1. OK, thanks. I have an order in to buy some of this. Just wanted to be sure I hadn’t missed something obvious.

                  1. Can anyone see the quotes, trades & volume for PSALL? The Schwab Trading Platform shows nothing.

                    1. Thanks to both of you.

                      I use freerealtime for other counters, so will now include PSALL.

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