Self Storage REITs Highlights – 2nd Quarter 2012

Published in Insight – by John Barry

CubeSmart (CUBE)

Same Store Results (Q2 2012 vs. Q2 2011)

  • Physical occupancy was 83.6% vs. 80.0%. As of July 31, it was 85%.
  • Rental income increased 2.3%, total revenue increased 3.0%; operating expenses decreased 0.7% and net operating income 5.2%.

Investment Activity

  • Acquired 2 facilities; one in Dallas Fort Worth, TX for $5 million and one of the two remaining facilities remaining to close from the Storage Deluxe portfolio acquisition from 2011 for $59 million.
  • Sold 8 facilities for $22.3 million. Three were in Michigan and 5 on the Gulf Coast.
  • Subsequent to the end of the quarter, the company closed on 4 stores in Houston, 1 in Dallas, 1 in Norwalk, CT, and 1 in Alexandria, VA for a total of $48 million.
  • The company has an additional 6 stores under contract for $26 million.
  • Year to date, the company has either closed on or placed under contract for acquisition a total of 16 stores for $92 million.
  • Year to date, the company has sold or has under contract to sell a total of 15 facilities including complete exits of the following markets: Michigan, Louisiana, Alabama, and Mississippi.
  • Away from the portfolios acquired 76% of acquisitions were done directly with facility owners that CubeSmart provided third party management.

Balance Sheet

  • Issued $250 million of unsecured notes in debut public bond offering.

Quarterly Dividend

  • Declared $.08 dividend
  • Current Yield 2.70%

Third Party Management

  • Added 7 stores to their management portfolio during the quarter plus another 31 subsequent to the quarter end. These are in North Carolina, South Carolina and Georgia.
  • Now manage 137 stores

Outlook & Comments

  • Company has seen significant move-in activity and an all time high occupancy for the Company.
  • Optimistic about rental performance for the balance of the year.
  • The acquisition pipeline remains sizable in their core markets.

Extra Space (EXR)

Same Store Results

  • Increased revenue 6.7% and NOI 10.2%
  • Rents are up 3%
  • Occupancy increased to 90.4 % vs. 87.7%
  • Discounts and promotions down 11% this year
  • Major markets with revenue growth exceeding the portfolio average were Chicago, Dallas, Houston, San Francisco and Tampa. Below average markets were Las Vegas, Memphis and Phoenix.

Investment Activity

  • Acquired 51 stores for year to date including 4 for $21 million in the second quarter. These were located in MD and FL.
  • Closed on 9 stores this quarter in CA, CO, NJ, NY, and SC. The other 9 stores under contract are in MA, NJ, NY, TX, UT and VA for $71 million.
  • Acquired the joint venture interest 36 properties for $300 million from Prudential Real Estate

Balance Sheet

  • May consider issuing new equity since the stock price is so high but they need to have a purpose for the cash
  • Obtained additional line of credit for $100 million.
  • In April, the company issued and sold $226 million of common stock

Quarterly Dividend

  • Paid Q2 dividend of $.80
  • Current yield 2.40%

Third-Party Management

  • The company manages 179 stores under a third party management agreement

Outlook & Comments

  • Focusing on fundamentals on every revenue opportunity and expense saving opportunity
  • Tenant insurance has been a revenue driver
  • Third party management has been growing
  • Lack of new supply should continue and has been important

Sovran Self Storage (SSS)

Same Store Results

  • Revenues increased 5.1% and NOI improved 8.6%.
  • Occupancy improved to 85.7% from 79.9%
  • Strongest stores were located in New England, North Carolina, Texas and Florida.
  • Modest declines were in Phoenix.

Investment Activity

  • Acquired 4 stores (Miami, FL, Norfolk, VA, and 2 in Chicago, IL) during the quarter for $43 million plus 1 in Atlanta, GA for $8.5 million.
  • Sold 5 non-strategic stores (4 in Michigan and 1 in Salisbury, MD) for $13.5 million.

Balance Sheet

  • Cash on hand of $7.5 million plus $100 million line of credit

Quarterly Dividend

  • Paid $0.45 dividend
  • Current Yield 3.10 %

Outlook & Comments

  • Growth drivers have been web based marketing strategy, revenue management system and outstanding customer service platform.
  • Encouraged by greater customer traffic and resiliency in most markets.
  • Planning for $20 million in expansions and $14 million for capital improvements

Public Storage (PSA)

Same Store Results

  • Revenues increased 5.1%, operating expenses down 1.4% and NOI up 8.3%
  • Occupancy 92.6% vs 92.3%
  • Occupancy at end of July 93.1%
  • Annual rent/SF $13.23 vs $12.61, increase of 4.9%

Investment Activity

  • Acquired 4 stores (2 in CA, 1 in NY and 1 in FL) for $46 million
  • Subsequent to the end of the quarter, the company acquired 1 store in CA for $6 million
  • Currently have 2 stores under contract for $30 million

Balance Sheet

  • Issued $287 million of 5.625% preferred stock and redeemed $416 million of 7%, 6.60% and 6.50% preferred stock

Quarterly Dividend

  • Declared dividend of $1.10
  • Current Yield 3.0%

Outlook & Comments

  • Solid demand, record high occupancies, and higher realized rents
  • Average move in rent was $114 while average move out rent was $120.
  • Street rents were flat year over year after factoring in lower discounts.
  • UK stores will be impacted by 20% Value Added Tax beginning in October

Please give us a call at 717-779-0804 with any questions you may have.