Public Storage Prices Preferred with Rock Bottom Coupon

Storage REIT Public Storage (PSA) has priced their new preferred.

The pricing is fixed at 4.625% for 20 million shares–with another 3 million for over allotments. This is now the lowest coupon the company has outstanding–they had sold a 4.70% issue in November, 2019 and that issue is trading at $25.55.

The new issue is cumulative, non-qualified and investment grade.

Proceeds of the new issue will likely be used to redeem the PSA-V 5.375% issue.

All of the companies outstanding preferreds can be seen here.

The pricing term sheet can be read here.

42 thoughts on “Public Storage Prices Preferred with Rock Bottom Coupon”

    1. PSA-W seems to be a good bet, if they redeem soon then you get 5.2% till then. If they don’t then you get 5.2% till they offer another series to redeem the PSA-W.

  1. If anyone still interest in SLMNP (was discussed on the site a while ago) it’s trading roughly at par now ($1,000). I added to my position a bit today, picked it up for $1,004. There was a time a few months ago we were looking at $1,030 as a good price. Parent company (LYB) very solid financially.

    1. I used to work for LYB, very solid. I was reading the conversion rules on it since Schulman got bought by LYB. Honestly have a hard time figuring out what it is post merger, anyone have an idea what the conversion is now?

      1. There is no longer any way for LYB to force a conversion or redemption which makes the issue even more attractive.

        Search the site as there has been lots of past conversation about this.

        1. Interesting, I tried to place an order at TDA and it is being rejected due to a DTC Chill.

          Anyway, I corresponded with investor relations and this is the correct formula,
          19.1113 *($42 + CVR). The CVR paid out a total of $2.379/share.

          That creates the put at 848.14.

  2. Public Storage Announces Redemption of All Outstanding Depositary Shrs Representing Interests in Its 5.375% Cumulative Preferred Shrs, Series V

    Dow Jones Newswires June 09, 2020 04:10:00 PM ET

    (MORE TO FOLLOW) Dow Jones Newswires (212-416-2800)
    June 09, 202016:10 ET (20:10 GMT)
    Copyright (c) 2020 Dow Jones & Company, Inc.

  3. Call protected PSA issues have YTCs from 1.00% (PSA-B) to 4.29% (PSA-J). At par or below, PSA-L even with its 4.65% coupon offers the highest PSA YTC for the longest term.

    If focused on coupon, see PLDGP at 8.54%. YTC is -1.14%.

    #PeterMosbaek

    1. alpha8–I love PSA–used to love their preferreds–but can do so much better with other high quality issues–although they are getting rarer.

      1. Tim I agree completely but went ahead and bought a 400-share slug anyway – all at or under “par” and in a tax-advantaged account. I was on a buying binge during the downturn so most other allocations are loaded-up and in some cases over-allocated especially after the price appreciation. So there’s incentive here to spread it around.

        For a corner of current holdings, I’m viewing the cost on yield for PSA-L as an insurance premium against the possibility of punitively low rates and redemption purgatory going forward. Yes the yield is dilutive to current holdings but the issue is a good diversifier with that long call date. Alternatively, if rates rise, will be happy to add to this issue at already-set strategic price points – so I’m not trapped at this price.

        Worst case scenario in short term all other being equal, appears this should trade mid 25s in short order to align with the other PSA issues.

        1. Great minds think alike Alpha

          I also bought 400 on this new PSA issue at par in my tax deferred account. Yeah, the yield is not great but the long call date and rock solid nature of PSA was worth it to me. I own a chunk of the 5.60% PSA-H bought during the crash at $25.15 – but it and all the PSA issues are too far over par for my liking to buy them given how PSA likes to retire old issues when they can issue new paper like this. I figure worst case, it is a reasonable place to park some cash if a better opportunity comes along

          1. Mav, …and it’s one we don’t need to keep looking at it. Put it on the shelf and forget it. PSA’s common is one of the top five stocks least correlated to the S&P and they excel during recessions as a result of the inevitable downsizing that occurs. But also like you said – until another opportunity comes along.

            Risk-adjusted, the 4.65% 5-year YTC is very market-competitive. Heck, lower-rated issues like DUKB has a YTC of 2.51%, DUK-A of 3.43% and also the lower-rated USBs are 3.35% and under. Similar-rated NRUC is 3.24%. Yet all of these have higher coupons, making them all much more callable if we end up in a yield-starved world, like the one currently underway across the pond. And if market rates rise and PSA-L price drops, we can happily oblige the market by averaging down.

            For a corner of holdings, a high-quality hedge against the unknown.

        2. I love the PSA holdings even though the rates get lower and lower. Picked up PSA-C during all the carnage 2 months ago for a little over $23, it’s over par and if they call it next year it will be a 9%+ ytc. But instead of this new issue why not just switch over to PSB (still a good company, not as good as PSA) and pick up PSB-Z. it’s under par, 4.88% coupon is better than this new issue from PSA, and no callable until 2024. It’s also IG.

          1. Franklin, Although PSB-Z is a notch lower on the rating scale, completely agree, though already have a full sled of PSB-Z bought under $24. That’ s the problem, allocations of the good ones are full or over-full.

          2. I use to own PSB preferreds, but PSB is mostly into office buildings and in California, at least, businesses there won’t get evicted if they don’t pay their rent thorough at least September and probably longer (the California Judicial Council won’t let courts their issue eviction summons except for issues involving public safety. I have no idea how that effects the bottom line). With storage units on the other hand, you don’t pay your rent and they will auction your stuff off pronto. I’m sticking with PSA-I which at $25.69 has an effective yield of 4.75% and can’t be called before 2024.

  4. I just noticed that Ford debentures are yielding less than 7% (rated BBB-, not enough minuses!). There’s junk and then there’s garbage.

    I am gradually converting to FF to wait for the effect of the trillions and trillions from DC. After reading about the Fed’s new rate pegging strategy, I wonder if LIBOR might be a more market oriented index?

  5. I picked up 10,000 shares when they (psa-w, psa-x) dropped to $23. I will hold then until they redeem. I thought i read somewhere in the last 6 months they got a European bond for like 1+ %.

    1. It is almost a guarantee that PSA will redeem these later this year (maybe in 3 months). Even if it is 6 months off, you will get ZERO return. Why hold onto nothing when there are much better alternatives and the cost to trade at most brokerage firms is $0? Bank your profits and look elsewhere. PSA-W and PSA-X aren’t going anywhere but to $25.

  6. I have followed PSA for about 20 years and this is clearly the lowest coupon rate I’ve seen for them. However, the few bonds they have issued now pay next to nothing. Their bond due in 2029 with a coupon rate of 3.385% is now trading around $113 with a YTM of about 1.78%. It is rated A2/A.

  7. The thought here is they may redeem a older outstanding preferred. I don’t follow this company, so does anyone else know if they have a history of redeeming their preferred’s ? Would make sense they want to lower their cost of debt and raise some capitol too but I wonder on other hand of companies that keep expanding their debt. Not saying this one does.

    1. Charles M–the company is financed through preferred with little debt. They are a serial issuer and redeemer–they will redeem the 5.375% issue.

      1. Tim, you mentioned there are other high quality issues paying better than PSA , are they fixed rate? Could you mention a few?

        1. Charles, Here’s a few, but not many left as most are now bid out toward Pluto:

          Preferred (all BBB+)
          RZB, RZA (both non-QDI), CNTHO, CKNQP, NTRSO, CBKPP (QDI)

          CEFs (both AAA)
          NCZ-A, NCV-A (both partial QDI which boosts taxable-equivalent yield)

          CNs (both BBB+ equivalent or better)
          SLFSF, CNUTF (both QDI – but know your tax rules)

          There’s a few others though many are at past-call pricing which if redeemed will result in self-flogging and self-loathing.

          1. Alpha, As you well know, its always a multi pronged battle. What yield you want, what risk one is willing to take, and what the market will give. At some point one is paying excess premium for “safety” when issues like PSA are just as exposed to volatility as most other preferreds in crazy markets. Many issues with lower ratings than this have 50-75 plus years experience paying without missing a payment. But, confidence in what one owns is an important if unquantifiable equation in purchasing though.

            1. Well that is true Grid, but at the same time I am not sure there are any of those issues with lower ratings that have been around for 50-75 years currently available at reasonable prices, let alone prices close to par.

              Don’t get me wrong, I own plenty of your favorite illiquids, and have no problem buying them at a reasonable premium. But just aren’t any out there right now.

              Hence, the battle you refer to – not just on yield and risk – but also on how far over par one is comfortable paying with call risk looming. No easy answers

              1. Maverick, quit bringing more risk into the equation….Its complicated enough, lol. Yes, your statement is true. But I wasnt totally referring to those as it takes a different breed to handle that stuff. Some other examples include SJIJ. This sits at par and 5.6% yield. The company has paid dividends 69 straight years. Another example is EP-C. Back out interest payment this week and YTC at 2028 is around 6%. And EP-C did not fall as much as say PSA-F did in sell off. There are other examples, But I certainly understand ones desire for safety. Beauty is in the eye of the beholder is what it boils down too.

                1. Grid, I agree some of those old ute illiquids are good as gold. For anyone fortunate enough to acquire them they are keepers. While I do have a bunch that on any given day don’t even trade a single share, could always use more. Please let me know if you’re ready to let go of any. lol.

                  p.s. Yes am holding EP-C though will swap for an old illiquid. lol

                  1. Fully agree, alpha8.

                    Illiquid Ute Preferreds have been a very solid and stable income stream. There have been times where rumors of call arise, and not come to pass; still, it is an ever present threat that cannot be discounted.

                    Issues like AILLL, AILNP, AILLO, CNTHP, CNLPL, IPWLK, UEPEP etc are solid sock drawer residents – until redemption/call do us part.

                    1. Inspy, just as important to me as these are the ying and yang to hold in market craziness. 2013 Taper, 2016 rate scare, Dec. 2018 massacre, 2020 march madness it always worked…These are the ones you dump to buy the crashing liquids. As you have time to be first out to sell as the floor bids dont move. Buy the crashed preferreds, run them up, dump and buy the illiquids again… Of course now that I have you and Camroc to contend with my fail safe plan might not work as you two will probably beat me out the door!

                  2. Alpha, I did let 70 go of WELPM at $137 today. I recently bought at $124. I can put the ask back up at $137 if your interested in the other 130 shares. :)… Ironically EP-C was one I had to dump at a loss in mass during March madness. At the time it had only dropped 10% or so and others were down over 30%. So I had to lose money to make money. That wasnt the typical way I like to do business, but I had to do it as the math was favoring it… Anyhow, I am back in a full position buying more recently in $45 range up to today just under $47. I paid more to repurchase than when I dumped at $43 or so, but made it back in spades with those SJIJ type purchases in $15-16 range.

                    1. Grid, Only you can do that so successfully. Now that I finally got a 100 share toehold in WELPM at $126.50 I just don’t want to give them up. But I 100% understand what you’re doing and there’s just no doubt it’s a yield booster. I’m doing plenty of flips but for some of these old ute shares I just don’t want to part with them, at least for now. Congrats on the $137, that was a nice couple-of-weeks score.

                2. Ok, Grid – you made me take a closer look at SJIJ and EP-C. Maybe in my head, the fact it had Jersey in its name automatically made me shy away previously, lol. I don’t trust the governments in states like NY, NJ, Illinois and California even when dealing with a utility. But I did end up buying a half a position today in SJIJ.

                  1. Maverick, when it first came out I dismissed it as some industrial preferred as I hadnt followed this ute. It actually traded strong out of the gate but never has recovered to that lofty perch. Anyways, I researched it more and new exactly what it was and its history, so I just waited until I could find a price. Then March hit and boy did it hit the price, lol…Its has been a solid flipper a few times after that. It appears to have settled back down into the $25 range. My assumption is I am holding longer term now, as better options appear few for me anyways.

                    1. Yeah, I own and follow a number of utes (common as well as preferred) and the name Southern Jersey Industries has never been on my radar. Not a real descriptive name for sure.

  8. Will this give a boost to the prices of other good quality preferreds’ which have a better yield?

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