Public Storage to Sell New Preferred

Self storage giant Public Storage (PSA) has announced that they will issue new preferred stock.

The company which has long depended on preferred equity issuance to finance the business currently has no older issues redeemable. The PSA-X and PSA-W issues will be redeemed tomorrow (both 5.2% coupons).

There is a 5.40% (PSA-B) issue which will be redeemable 1/31/2021. This issue is trading at $25.73 right now and holders may want to consider exiting now–this issue will be called 1/31/2021 and thus has about 50 cents worth of dividends to be collected up until call date.

All of their preferred issues outstanding can be seen here.

The preliminary prospectus can be read here.

If you prefer was right on top of this with EarlyBird and mcg chiming in. EarlyBird says ‘yield talk’ is in the 4-4.125% area. If you Prefer is tossing out a 3 handle guess.

23 thoughts on “Public Storage to Sell New Preferred”

  1. Good tip! If they are calling “X” “W” with a coupon of 5.2% than it is a good bet they will call “B” with a 5.4% coupon. I hated to let it go but I sold 600 shares at the end of the trading day for 25.76.

    1. Calling the B is close to a certainty and if rates stay this low PSA will call them all as they come up. With PSA YTC is also yield you gonna get, so keep an eye on those YTC figures.

        1. Dick,
          I did not. The original price talk b4 ticketing started was 4%. It priced @ 3.875 so to me that indicates pretty good demand. But after all it’s a PSA issue and many folks consider their preferreds to be the gold standard in dependable cash flow for preferreds. Confession, I bought some shares @ IPO while holding my nose. I live in Arkansas and it’s nearly 5PM. I’m still holding my nose. But I make my own cash flow – no employer pension. Do have SS and IRAs. So I have to be open to what the market offers. Whether I like it or not.
          I made my purchases in taxable accounts so I compare what preferreds offer after tax compared to municipals. Last week I bought an Arkansas Sewer & Water issue with a current yield of 2.75 – YTC of 2.80. This new PSA issue compares favorably to that. But dad gum I would be happier with a little higher coupon.

  2. This is no surprise. Their recent PSA-M at 4.125% trades at $25.85, so a 4% (or less?!?) might still trade well. I expect folks would buy it, just as they did with PSA-M. Four of theirs have a 1st-call date in 2021, so this won’t be the last new one.

    1. sdmarc, they do have some lower coupons where they have up to 2 billion in debt. The smaller stuff (although many issues) are preferreds. Would have to ask their investor relations why they have chosen this path.
      This is to be expected. Like i said… seems every person i know has or is currently refinancing right now, so I would think that companies are doing the same thing. I would think with all this money flow, cheap borrowing, … that the overall wealth of people is going up. Has to mean rates will tick up next year, so it makes sense to capture what you can and lock in for years and saving lots of dollars in the debt space.

      1. This yield is just ridiculous, there are all sorts of illiquid utes one can snag over 4% that are just as safe if not safer.

        1. I reviewed all of their outstanding pfds and at par this one has highest ytc, by far, of all their other issues. Not counting callable in next year.

          I don’t think they have ever done a deal where you’d say “that’s a good yield”

          1. If You Prefer, I have complained about the ever increasing lower yield every issue they have sent to market, ha!
            And that is why I never buy them as I take it personal. They are ruthless to their preferred holders (which I concede is what good management should do) every chance they can get. I like management that is nice to preferred holders (ie, lazy) and dont redeem the first chance they can. 🙂

            1. Perfectly stated, Grid. I look at it this way, for a small (very) percent of a portfolio one might consider par bonds. I was reviewing one where av coupon yield was just over six. Some 10% was under 5. At least it is a quality issue and if we get another squeeze they might far OK. The rate is a concern. I’ve been concerned about lower rates since Jimmy Carter was in office

        2. Used to love the PSA preferreds but not at these rates. Bought CNLPL last week for a 5.49% current yield, speaking of illiquids, Grid. Was lucky to get my hands on more of it but I’ll take the call “risk” any day over sub 4% on PSA.

          1. Franklin, its not an overriding purpose but just a side job mission. But I have been adding shares of issues that are “uncallable” as a bit of a permanent if not near term hedge on “lower for longer”.

      2. Mr Conservative said: “I would think with all this money flow, cheap borrowing. . .”

        In this era where seeming anybody and everybody can get cheap money, on the surface it does not make sense to me why QRTEP comes to market with a 8.0% coupon. You would think any company that would have to pay that on a preferred is walking a tightrope above the bankruptcy alligator pit . . .

        1. Tex, If I am understanding correctly, this was a “self dealing” preferred. The price was what they wanted to give to existing shareholders (remember big boss John Malone and another gentleman were doled out $100 million themselves and are getting that 8% also) not what the market necessitated.
          They deliberately leveraged the balance sheet on purpose without need..But because they wanted too.

        2. last month they issued 500 million of 4.3% to redeem 5.1%. Would be interesting to look in the crystal ball a few years from now. Will junk rated bonds be issued at 2%? Will investment grade bonds be issued at .5%, and the shrinking and compressing of spreads between the two? When rubber bands are stretched…

          1. I recently bought some PPWLO in mid $130s a week or two ago, and thought I overpaid to get them at a 4.4% yield. This PSA preferred may change my mind. And PacifiCorp earned $771 million last year, and doled $170,000 out in annual preferreds from that. That is over 4,500 times coverage ratio.

            1. Grid, we obviously think all of the preferreds/babys we buy will be money good for dividends/interest. We will leave all of the speculative ones that we consciously think might not be money good to your good friend Rida. That said, in a ZIRP world with the US 10 year consistently under 1.0%, the rates that all of these preferreds pay seems irrationally large to me. Yeah, I know about how they are not debt and they can suspend dividends without defaulting, but we stipulate they are NOT going to do that. Stated differently PSA might be issuing sub 3% preferreds and the rest of the quality curve falling also so your 4.4% might be where higher risk issues end up at. . .

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