Public Storage

1. Revenue and Net Operating Income (NOI): The first step in evaluating the financials of a REIT self storage company is to look at their revenue and NOI. Revenue is the total amount of income generated by the company, while NOI is the income generated by the property after deducting operating expenses. A strong and consistent growth in both revenue and NOI is a positive indicator of a healthy company.
2. Occupancy rates: Occupancy rates refer to the percentage of occupied units in the self storage properties. It is an important metric to assess the demand for self storage units in a particular market and the effectiveness of the company's marketing strategy. A high and stable occupancy rate is a positive indicator of a strong financial performance.
3. Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO): FFO and AFFO are commonly used metrics to evaluate the financial performance of REITs. FFO is a measure of a company's cash flow from operations, while AFFO reflects the actual cash available for distribution to shareholders. A consistent growth in FFO and AFFO is a positive sign for the company's financial health.
4. Debt and leverage: It is important to analyze the REIT's debt levels and leverage ratio. A high level of debt or leverage can increase the risk for the company and its shareholders, especially during times of economic downturns. It is advisable to look for companies with a moderate debt-to-equity ratio and low-interest expenses.
5. Dividend yield and dividend growth: Since REITs are required by law to distribute at least 90% of their taxable income to shareholders, dividend yield and dividend growth are important factors to consider when evaluating a REIT's financials. A consistent and growing dividend yield is a positive sign for investors.
6. Debt maturities and interest coverage ratio: It is important to review the REIT's debt maturities, which can provide insight into the company's debt repayment schedule. Additionally, the interest coverage ratio, which measures the company's ability to meet interest payments with its operating income, should also be analyzed to ensure the company has enough cash flow to cover its debt obligations.
7. Real estate portfolio: It is crucial to review the quality and location of a REIT's real estate portfolio. The portfolio should consist of high-quality and well-maintained properties in desirable locations. A strong and diverse portfolio can mitigate risks and generate stable income for the company.
8. Management team and track record: The experience and track record of the management team are critical factors in evaluating a REIT's financials. A competent and experienced management team will be able to make sound investment decisions, manage resources effectively, and drive the company's growth.
9. Market conditions and future prospects: It is essential to assess the broader market conditions and how they may impact the self storage industry. Also, it is crucial to understand the company's growth strategy and potential for future developments and acquisitions.
10. Comparative analysis: Finally, it is important to compare the financial performance and valuation of the REIT with its peers in the self storage industry. This can provide insight into how the company is performing relative to its competition and whether it is overvalued or undervalued.

The cost structure and profit margins in the REIT self storage industry can vary depending on a variety of factors, such as location, size, and market conditions. However, some general cost structures and profit margins can be outlined as follows:
1. Cost Structures:
- Acquisition costs: This includes the costs associated with acquiring the self storage property, such as purchase price, due diligence expenses, legal fees, and financing costs.
- Operating expenses: These are the ongoing costs of running the self storage facility, including property management fees, staffing, marketing expenses, insurance, utilities, repairs and maintenance, and property taxes.
- Debt service: If the REIT has incurred debt to acquire or develop the self storage property, it will have to pay interest and principal on the debt, which will be a part of its cost structure.
2. Profit margins:
- Rental income: The primary source of income for a self storage REIT is the rental income it receives from tenants. The profit margin on this income can vary but is typically high, as a relatively low percentage of the revenue is usually needed to cover the operating expenses.
- Non-rental income: Self storage REITs can also generate income from other sources, such as the sale of moving supplies, insurance, and late fees. The profit margins on these items may not be as high as rental income, but they can still contribute to overall profitability.
- Capital gains: If a self storage REIT sells a property for a price higher than its acquisition cost, it will generate a capital gain, which can significantly impact its profit margin.
Overall, the profit margins in the REIT self storage industry are generally considered healthy, with some REITs reporting margins of over 20%. However, as with any industry, profit margins can fluctuate depending on market conditions and operational efficiency. It is important for REITs to carefully manage their cost structure and focus on maximizing revenue from rental and non-rental income sources to maintain healthy profit margins.