Public Storage (NYSE:PSA) is back in the market with a new series of preferred stock, the Series T. Details are below (emphasis mine):
- Issuer: Public Storage (Ticker: "PSA")
- Capital Level: Preferred Stock
- Expected Ratings: Baa1/BBB+/A- (Positive/Stable/Stable)
- Security: Series T Cumulative Redeemable Preferred Stock
- Distributions: Fixed Rate, Cumulative Quarterly distributions
- Use of Proceeds: Proceeds will be used to make investments in self-storage facilities and in entities that own self-storage facilities, to redeem preferred securities and for other general corporate purposes
They are announcing $100MM, but I would expect demand to be great enough (as with every other recent REIT preferred issue) to upsize the deal rather significantly.
I would expect the deal to come at a yield of between 5.65% - 5.70%.
My two top picks for redemption candidates are:
- PSA-M (6.625% coupon, currently callable): $400MM
- PSA-C (6.60% coupon, currently callable): $100MM
Saving a minimum of 80bps makes sense, and the company has shown their efficiency in redeeming their higher coupon outstanding issues.
The deal at these levels seems a little tight (although it gives you 5 years of call protection and is A rated) so I would look for value somewhere else or, if one needs to be in the PSA name, perhaps look at the PSA-P, PSA-Q or PSA-R.
- PSA-P currently yields 5.95%, trades at $27.95 and is redeemable 10/2015
- PSA-Q currently yields 5.82%, trades at $28.30 and is redeemable 4/2016
- PSA-R currently yields 5.87%, trades at $27.33 and is redeemable 7/2016
While these picks do trade at a premium to par, they offer call protection and a higher yield than the new series. PSA currently has no issues trading below par.