The Tool Desk
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1. Start with the operating trend at established properties
Read the latest annual and quarterly filings, beginning with the company’s same-store pool: the facilities management treats as comparable over the period. Check how the issuer defines that pool, since acquisitions, dispositions and facilities still leasing up can change total company results without showing how established properties performed.
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For the same-store group, follow occupancy, rental rates, revenue, operating expenses and net operating income (NOI) over multiple reporting periods. Consider whether NOI changes come from stronger rents or occupancy, expense growth, or both. Public Storage identifies local competition as a factor that can affect occupancy, rental rates and advertising expense in its markets (Public Storage’s 2023 Form 10-K).
Separate comparable-property results from expansion
Put same-store performance alongside total portfolio growth. Acquisitions and development may expand a REIT, but they are different from organic improvement at established facilities. Look for how recently acquired properties or projects under lease-up are treated in reported comparisons, and avoid attributing all portfolio-level growth to better operations.
#1 Best Overall
Check leasing and rent-setting
Storage results depend on filling available units, setting rents and collecting tenant payments. Extra Space Storage describes these as material drivers of its results (Extra Space Storage’s 2023 Form 10-K). Assess whether the reported occupancy and rent trends support one another; a rent change alone does not describe the full operating picture.
2. Read GAAP results before turning to FFO and AFFO
Start with GAAP net income and operating cash flows. Then use funds from operations (FFO) as an additional way to examine a real-estate company, not as a replacement for those GAAP measures. Nareit FFO adjusts GAAP net income for real-estate depreciation and amortization and specified real-estate-related gains, losses and impairments. National Storage Affiliates describes FFO and Core FFO as supplemental performance measures (National Storage Affiliates’ 2023 Form 10-K).
Rank #2
Reconcile the issuer’s FFO definition
Read the company’s reconciliation from GAAP net income to FFO and any further measure such as Core FFO. Understand which items are excluded and whether the measure is presented per share. For growth comparisons, check both the adjustments and share counts rather than treating a higher non-GAAP per-share figure as self-explanatory.
Treat AFFO as issuer-defined
Adjusted FFO (AFFO) has no uniform computation across issuers. Global Self Storage notes that REITs may use different AFFO calculations and terminology (Global Self Storage’s 2023 Form 10-K). Read each company’s definition and reconciliation item by item, including adjustments related to capital needs. Do not compare one company’s AFFO directly with another’s until you understand the differences.
There is no universal AFFO benchmark or threshold established by these definitions. Use the reconciliation to judge what the issuer’s measure includes, rather than assuming that similarly named measures are equivalent.
3. Assess debt, maturities and funding needs
Review the debt schedule and liquidity disclosures. Note the amount of debt, whether it is secured or unsecured, fixed- or variable-rate exposure, upcoming maturities, and the company’s stated financing needs. National Storage Affiliates flags leverage and interest-rate risks in its filing (2023 Form 10-K).
Extra Space Storage describes potential funding sources for acquisitions, development, redevelopment and capital expenditures, including operating cash, revolving credit, commercial paper, secured and unsecured financing, equity, joint ventures and asset sales (2023 Form 10-K). Compare the planned investment with the available funding and debt profile. Borrowing can support investment but increases financing exposure; issuing shares changes each existing holder’s ownership per share. Consider debt capacity, interest costs, maturities and cash generation together rather than relying on an isolated leverage figure.
4. Examine local competition and development risk
Self-storage performance is tied to local property markets. Review competition, new supply and demand conditions in the areas where a REIT operates, and consider whether occupancy and rent assumptions appear sustainable. Public Storage identifies competition as a potential influence on occupancy, rates and advertising expense (2023 Form 10-K).
Evaluate development and acquisitions separately from same-store results. Public Storage’s filing discusses development risks such as delays, cost increases, regulatory issues and revenue falling short of underwriting assumptions (2023 Form 10-K). For a proposed project or acquisition, examine expected investment returns against construction or purchase costs and the plan for leasing the property. Risk disclosures establish possible failure modes; they do not establish whether a particular current project will succeed.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.5. Compare two REITs on consistent measures
Use the same financial periods and definitions wherever possible. A side-by-side worksheet helps expose the differences between operating performance, growth sources, financing and valuation.
| Comparison area | What to compare |
|---|---|
| Established properties | Same-store occupancy, rental rates, revenue, expenses and NOI growth. |
| Portfolio growth | Growth from acquisitions and development, separated from same-store performance. |
| Reported performance | FFO per share and its reconciliation; AFFO only after reviewing each issuer’s definition and adjustments. |
| Financing | Debt amount, maturities, interest-rate exposure, liquidity and planned funding needs. |
| Markets and projects | Local supply and competition, plus exposure to development and lease-up execution. |
| Valuation and distributions | Valuation or dividend measures calculated from a common price date and clearly identified financial measure. |
6. Treat valuation as an assumptions exercise
Possible comparison lenses include price-to-FFO per share, price-to-AFFO per share, dividend yield and estimated net asset value (NAV). For any market-based measure, use a clearly dated share price and a stated financial period; for AFFO, also identify the company-specific definition.
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