KeyBanc Upgrades Public Storage (PSA) to Hold; Reiterates a Hold on U-Store-It (YSI)

March 5, 2009 7:35 AM EST Send to a Friend
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Price: $171.52 --0%

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    6 Buy, 10 Hold, 3 Sell

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KeyBanc upgrades Public Storage (NYSE: PSA) from Underweight to Hold on valuation. KeyBanc reiterates a Hold on U-Store-It (NYSE: YSI).

KeyBanc analyst says, "Public Storage and U-Store-It concluded the 4Q08 earnings season for the self storage sector with a sober view of their sector. While both management teams remain optimistic that storage will outperform other commercial real estate property types, both acknowledged that in absolute terms, the sector is not immune and fundamentals are on the decline. Move-outs are accelerating at a greater pace than move-ins, and now the business/commercial tenant sounds as if it will be a source of weakness in 2009+."

"The challenging environment is not going to lead to a recovery anytime in the immediate future, in our view, and we caution investors about jumping in too early - we expect the sector to remain under pressure from a whole host of economic and capital market-related factors. Importantly, the Company's fortress balance sheet remains a defensive shield that should mitigate earnings downside and provide for opportunistic investments. Accordingly, we view the upside and downside risks to be more balanced at this time...Visibility in storage is low. Forecasting is difficult in the storage industry as a result of the short-term nature of the leases. Illustrating how limited visibility can be within storage, Public Storage noted that it was unable to recognize the sharp deterioration in fundamentals last October, and was not fully prepared with regard to its media spending efforts. Since media purchasing takes one to two months to arrange, PSA was unable to ramp up media spending until January 2009."

Public Storage, formerly Public Storage, Inc., is a fully integrated, self-administered and self-managed real estate investment trust (REIT) whose principal business activities include the acquisition, development, ownership and operation of self-storage facilities, which offer storage spaces for lease.

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