Public Storage may not be past the worst of its pandemic pain.

During the self-storage REIT’s Aug. 6 earnings call, executives said they expect same-store revenue in the second half of 2020 to drop even further than it did in the second quarter — 3% versus the same period last year. Public Storage blames the second-quarter revenue decline primarily on a 2% decrease in realized rent per square foot and a 31.8% plunge in late fees and administrative charges.

“There can be no assurance how quickly we can return to revenue growth after 2020,” the Glendale, CA-based company said in a filing with the U.S. Securities and Exchange Commission (SEC).

Public Storage noted that although late charges and administrative fees represent just 4% of revenue, they contributed to nearly half of the revenue decline in the quarter that ended June 30. The charges and fees dipped due to fewer move-ins, stepped-up fee concessions and accelerated rent collections.

The dim second-half outlook comes despite what the REIT calls “certain encouraging signs” that promise to improve demand for storage. Those positive trends include a jump in year-over-year occupancy, a moderation in rental rate decreases for move-ins and continued low rates for move-outs.

On a positive note, President and CEO Joe Russell said Public Storage has restarted lien auctions and has reinstituted rent increases following a pandemic-triggered hiatus.

Acquisition activity

Although the REIT struggled with pandemic-related headwinds in the second quarter, it proceeded with six acquisitions totaling $67.1 million. After the quarter ended, Public Storage bought or was under contract to buy five facilities for $33.3 million.

Looking ahead, Russell said Public Storage is shopping for value-add acquisitions, such as non-stabilized facilities or properties that round out its presence in certain markets. The REIT’s acquisition team also is considering undeveloped land that’s in various stages of entitlement.

Other highlights of the company’s second-quarter results include:

  • A 6.8% decrease in same-store NOI.
  • A 6.7% rise in same-store operating expenses.
  • The addition of nine facilities to the third-party management platform.
John Egan