The four publicly traded, U.S.-based self-storage real estate investment trusts (REITs)—CubeSmart, Extra Space Storage Inc., Public Storage Inc. and Sovran Self Storage Inc.—and U-Haul International Inc. have released financial statements for the quarter that ended June 30, 2013. In general, all five entities showed gains in key areas, particularly funds from operations (FFO) and increased occupancy.
"Our operational strength during the quarter was broad-based, with all of our regional markets benefiting from healthy occupancy and revenue gains," said Christopher Marr, president of CubeSmart. "Notably, our same-store portfolio occupancy of 90 percent at quarter end—an all-time high—marks an important milestone for the company and was accompanied by reduced promotional activity and positive pricing momentum. In addition to our strong organic growth, we have continued to execute on our external growth initiatives, with year-to-date acquisition and disposition volumes that are at the upper end of our annual guidance targets and are consistent with our disciplined investment objectives."
"Strong occupancy, stable rental and vacate trends, lower discounts and increases in street rates all combined to produce another outstanding quarter,” said Spencer F. Kirk, Extra Space CEO. “Our disciplined and creative approach to source and execute accretive acquisitions is proving beneficial to our shareholders. The operating environment remains positive and we remain steadfast in our efforts to maximize occupancy, optimize revenue and minimize expenses."
As a group, the self-storage REITs continue to be near the top of the U.S. REIT market, according to new statistics released last week by the National Association of Real Estate Investment Trusts (NAREIT). The self-storage sector topped all but one primary REIT market sector in the first seven months of 2013, posting a 12.7 percent gain. The Lodging/Resorts sector was the industry’s top performer, posting a 16.6 percent return.
“We had another outstanding quarter. Same-store occupancy grew to 91 percent at the end of June, and we’ve been able to gain pricing power by increasing rates and reducing discounts,” said David Rogers, Sovran’s CEO. “The summer season has been a good one, and we’re well positioned to push strong revenue growth into next year.”
Brokers and analysts have been keeping a close eye on Sovran’s stock, with a mixture of analysts rating the stock as a sell rating, hold rating and buy rating. Analysts at SunTrust and BMO Capital Markets recently raised their target sell prices for the company’s shares.
On Aug. 5, Sovran Chief Operating Officer Kenneth Myszka sold 20,000 shares on the open market. The stock sold at an average price of $69.94 for a total transaction of nearly $1.4 million. Myszka now owns 198,295 shares of the company’s stock.
CubeSmart reported FFO per share of $0.23, a 28 percent year-over-year increase. Same-store net operating income (NOI) at its 328 facilities grew 13.1 percent year over year. The company attributed this to 9 percent growth in overall revenue and a 1.5 percent increase in property operating expenses.
The operation gained 630 basis points in physical occupancy compared with the same quarter the previous year. The same-store physical occupancy was 90 percent as of June 30.
The company closed on nine self-storage acquisitions totaling $87.5 million during the quarter, and includes facilities in Florida, Illinois, Maryland, Massachusetts and New Jersey.
On May 29, the company declared a dividend of 11 cents per common share. The dividend was paid on July 15 to common shareholders of record on July 1. On Aug. 7, the company also declared a third-quarter 2013 dividend of 11 cents per common share. The dividend will be payable on Oct. 15 to common shareholders of record on Oct. 1. The board of trustees also declared a 3Q dividend of $0.48 for the 7.75 percent Series A Cumulative Redeemable Preferred Shares that will also be payable on Oct. 15 to holders of record on Oct. 1
CubeSmart owns or manages 514 self-storage facilities across the United States.
Extra Space Storage Inc.
Same-store revenue increased 7.8 percent and NOI rose 10.4 percent compared to the same period in 2012. FFO was 50 cents per diluted share, resulting in 31.6 percent growth compared to the second quarter the previous year.
Same-store occupancy grew by 180 basis points to 90.8 percent as of June 30, compared to 89 percent at the same time last year.
The company purchased four properties during the quarter for approximately $48.3 million. Those assets are in Hawaii, Maryland and Texas. Subsequent to the end of the quarter, Extra Space also acquired two properties in Arizona for $9.3 million.
The company paid a quarterly dividend of 40 cents per common share on June 28 to common shareholders of record on June 14. The dividend was a 60 percent increase over the previous quarter.
Headquartered in Salt Lake City, Extra Space owns or operates 974 self-storage properties in 35 states; Washington, D.C.; and Puerto Rico. The company’s properties comprise approximately 649,000 units and 71 million square feet of rentable space.
Public Storage Inc.
Revenue for same-store facilities increased 5.1 percent, or $20.4 million, in the quarter, as compared to the same period in 2012, primarily because of higher realized annual rent per occupied square foot and higher average occupancy. Cost of operations for the same-store facilities decreased by 2 percent, or $2.5 million, in the quarter as compared to the same period in 2012.
FFO was $1.83 per diluted common share, compared to $1.38 for the same period the previous year. NOI increased $28.5 million during the quarter compared to the same period in 2012, including $23 million for same-store facilities.
During the quarter, the company acquired one self-storage property (80,000 net rentable square feet) in Arizona for approximately $8 million, and completed $20 million in expansions to existing facilities which added about 293,000 net rentable square feet to its portfolio. Public Storage expects to complete the purchase of 29 self-storage facilities in four states for $374 million during the third quarter.
The company reported a regular common quarterly dividend of $1.25 per common share. It also declared dividends with respect to various series of preferred shares. All the dividends are payable on Sept. 30 to shareholders of record as of Sept. 13.
Based in Glendale, Calif., Public Storage has interests in 2,081 self-storage facilities in 38 states with approximately 133 million net rentable square feet. Operating under the Shurgard brand name, the company also has 188 facilities in seven European countries, with approximately 10 million net rentable square feet.
Sovran Self Storage Inc. (Uncle Bob's Self Storage)
Total revenue increased 18.4 percent over the previous year's second quarter, while operating costs increased 12.7 percent, resulting in an NOI increase of 21.1 percent. Same-store NOI increased 12.2 percent year over year. FFO for the quarter was 94 cents per fully diluted common share, compared to 77 cents for the same period the previous year.
Net income available to common shareholders for the second quarter was $17.9 million, or 57 cents per fully dilated share. For the same period in 2012, net income available to common shareholders was $11.7 million, or 40 cents per fully diluted common share.
Same-store revenue increased 8.9 percent year over year due to an increase in average occupancy of 380 basis points (89.7 percent), increased rental rates and growth in insurance commissions. Average overall occupancy was 88.3 percent, with units renting for an average of $10.89 per square foot. Facilities showing the strongest revenue gain were in Florida, New York, North Carolina and Texas, officials said.
Sovran did not acquire any properties during the quarter, but has three properties under contract in Colorado and New York for $27.9 million. The company expects to complete the purchase of the assets late in the third quarter.
The company paid dividends of 53 cents per common share.
Sovran, which operates facilities under the brand Uncle Bob's Self Storage, operates 471 facilities in 25 states, with a large presence in Texas.
U-Haul International Inc.
AMERCO, the parent company of U-Haul International, reported financial results for the quarter ended June 30, the first quarter of its 2014 fiscal year. Self-storage revenues during the quarter increased $7.4 million, nearly 12 percent, year over year to $42 million. Average occupancy per square foot increased nearly 21 percent during the quarter compared to the same period last year.
The growth in revenue and rented square feet was attributed to a combination of improved occupancy at existing locations as well as from the addition of new facilities to the portfolio.
Established in 1945, U-Haul has 41 million square feet of storage space at more than 1,200 owned and managed facilities throughout North America.