How does Public Storage CEO Ron Havner view the current market for self-storage acquistions?
“More product, lower quality and higher prices,” Havner said during the company’s quarterly conference call with analysts.
That view hasn’t stopped the Glendale, CA-based REIT from purchasing 12 self-storage facilities during the first quarter for a total of $98 million. The facilities span 800,000 square feet and are located as follows: seven in Florida, three in Ohio, one in South Carolina and one in Tennessee.
Since the end of the quarter on March 31, Public Storage has purchased or has under contract 13 more facilities for $115 million: six in Ohio, two in Texas, two in Utah, two in South Carolina and one in North Carolina.
In with a roar
Year-to-date Public Storage has acquirred more facilities than it did in all of 2015, a total of 13 facilities for $119 million.
“We are seeing that given the robust pricing, more product is coming to the market and I would say overall lower quality product,” Havner said. “Inside of that is some good product, some are reasonable priced and we have been able to do some transactions here and there.”
David Doll, president of real estate at Public Storage, said the company had a team looking for one-off self-storage acquisitions in markets across the country where the company wants to expand its footprint.
Keeping up with development
In addition to ramping up its buying activity, Public Storage continues to grow its development pipeline, reaching a record $506 million as of the end of the first quarter.
Havner said he estimates the number of facilities under development nationwide to between 800 and 1,000 and expects that number to accelerate through 2016.
“The number of people entertaining self-storage development or trying to get their arms around it…continues to grow,” Havner said.
As of March 31, square foot occupancy at same-store facilities was at 93.9 percent—exactly the same as it was the same time last year. John Reyes, chief financial officer, said occupancy increased 11 basis points as of April 26.
While occupancy hasn’t moved much from last year, Public Storage has raised rents during that time by 5.9 percent, charging $16.75 per square foot at same-store locations during the first quarter. This helped lead to a 6.5 percent increase in same-store revenue, same-store profits grew 10.4 percent.
Overall, the company brought in $611 million during the quarter, an 8.3 percent increase in revenue. Net income grew 12 percent during the quarter to a total of $317 million.
“The fundamentals of the business are great,” said Havner. “Our customer acquisition costs were down this quarter. We brought in more customers at lower costs and higher rates, and that’s playing into our development platform as well.”