Seeking Alpha
Debt, CFA, Portfolio manager, preferred stocks
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Public Storage (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.

Source: Public Storage Issuing Series T Preferred: My Top 2 Redemption Picks