Public Storage (PSA) stock intrinsic value fair value estimate & owner earnings analysis

Public Storage is the largest owner and operator of self-storage in the United States. It rents storage units by the month to households and small businesses, which makes revenue highly recurring: customers rarely leave over modest price changes, and the company has long raised rents on existing tenants each year. Buildings are simple and cheap to keep up, so a large share of rent turns into cash. What the business earns. We measure the cash the business generates for common shareholders after everything needed to keep it running: operating cash flow, less stock-based pay, less the spending needed to maintain the existing facilities (upkeep, the 2021-2024 property refresh program, and solar and LED installations), less roughly $195 million a year of dividends owed to preferred shareholders, who rank ahead of common holders. On that basis the business earned about $9.00-9.40 per share a year from 2016 to 2020, then stepped up to $14.30 in 2023, $14.12 in 2024 and $15.05 in 2025 after a string of large acquisitions (ezStorage and All Storage in 2021, Simply Self Storage in 2023). We measure from 2023, after that transformation, and exclude 2021-2022 because they still included cash from PS Business Parks, a stake sold in July 2022. Accounting judgements that matter. First, reported depreciation (about $1.15 billion in 2025) is far larger than the roughly $290 million actually spent keeping the facilities in shape; storage buildings are long-lived, so we charge the actual upkeep spending, not accounting depreciation. Second, spending to build new facilities and expand existing ones (about $300 million a year) is investment for growth, not a cost of staying in business, so it is left out of the earnings figure and handled separately below. Third, the property refresh program (repainting, signage, lighting) cost $100-190 million a year in 2021-2024 and has ended; rather than drop it entirely, we charge about $50 million a year as the normal cost of periodic refreshes. On that basis we start from about $14.80 per share. What has changed recently. Storage demand has been soft: the rent earned per occupied square foot was essentially flat from 2023 to 2025, occupancy slipped from 92.9% to 92.0%, and income from same-store properties fell 1.4% in 2024 and 0.5% in 2025. In the first half of 2026 same-store revenue was down 0.3% and operating cash flow was down about 1%, though management reports that rents for new customers turned positive in the second quarter. Two large deals also closed after the last annual report: the all-stock merger with National Storage Affiliates (July 22, 2026; 0.14 Public Storage shares per NSA share, about 10.9 million new shares, with Public Storage refinancing NSA's bank debt and notes and keeping about 488 NSA properties outright plus a 20% stake in a 313-property joint venture it manages), and the $1.2 billion purchase of Public Storage Canada, paid mostly in partnership units. We could not rebuild the combined company's per-share earnings from the audited filings available, so we treat both deals as roughly neutral per share in our main estimate: the properties were bought at about a 5% yield and paid for with shares and debt that cost about the same. Management's $110-130 million cost-savings target is not counted except in the optimistic case. Debt. Public Storage owes about $10.3 billion at an average cost near 3%, and $5.85 billion matures between 2026 and 2030. Its most recent bonds cost 4.9-5.0%. Refinancing at those rates adds about $220 million a year of interest by year ten, roughly $1.15 per share, and every case includes this cost. Base case: about $324 per share. Earnings dip about 1% over the next year, as current same-store trends and higher interest suggest, then grow 1.5% and then 2.5% a year. That is below the roughly 3.4% a year that rent per occupied foot rose from 2016 to 2025, through the 2020 disruption and the recent slowdown. It credits new facilities already under construction ($692 million of projects, $432 million still to spend, earning about 7%), the continued fill-up of recently opened and acquired facilities, and a continued building program of about $250 million a year at 7% returns, the pace the company has kept up for a decade using its own cash. After year ten, growth of 2% a year for twenty years reflects annual rent increases on existing customers, a feature the company has relied on for decades, and the value then levels off with no further growth. Bear case: about $224. The oversupply in Sunbelt markets and weak home sales that have held rents flat since 2023 persist, with earnings falling about 1-2% a year for three years before recovering to only 1.5% growth. The NSA merger proves about 4% dilutive, as NSA's Sunbelt-heavy portfolio has been weaker than Public Storage's. Maturing debt refinances near 6%. New projects earn only 6%, no further building program is credited, and there is no growth at all after year ten. Bull case: about $387. Rents for new customers, which have already turned positive, carry the company back to its 2016-2025 pace of about 3.5% earnings growth by year three. Debt refinances near the 4.9% the company paid in July 2026. Eliminating NSA's separate public-company overhead saves about $40 million a year. The building program continues at $300 million a year earning 8%. Growth of 2.75% a year continues for twenty years after year ten. What would make this wrong. The valuation depends mostly on whether Public Storage can go back to raising rents a little faster than inflation. Three flat years show this is not guaranteed. A lasting glut of new storage space, or a merger that performs worse than NSA's own history suggests, would push value toward the bear case. The company carries a moderate amount of debt and $4.35 billion of preferred stock ahead of common shareholders. That is manageable at current earnings, but it makes the bad years worse. The combined company's first full annual report will show whether the two 2026 deals really were neutral per share.