Don’t expect Uncle Bob to get into the full-service storage industry any time soon, or ever for that matter.
Sovran Self Storage CEO David Rogers shared his views on the wave of emerging startup companies offering pick up and delivery of stored items in urban markets, also called valet storage, during the company’s recent earnings conference call.
“We don’t mean to be arrogant about it, but it’s not our business,” Rogers said. “It gets a lot of publicity and over punches its weight, I think, in terms of actual deliverability and profitability.”
Rogers said some could have success with the business model catering to “millennials in very densely populated areas,” but seemed dubious of widespread adoption by consumers.
“Some of these entities are bringing a Tupperware tub, maybe a 30-gallon cooler size to your door and you are paying to put a couple of coats in it…it really is pretty far from our traditional business,” Rogers said.
Wait and see
That doesn’t mean that Sovran isn’t keeping an eye on full-service operators like Clutter and Makespace. Rogers said the company regularly monitors pricing of full-service operators.
But Rogers likened the threat that full-service poses to traditional self-storage to that posed by portable storage container operator PODS once did more than a decade ago.
“They never made money, changed owners three, four, five times. We considered it a threat back in 2002 and took it off the threat list in 2003,” Rogers said.
Meanwhile, Sovran leads its public peers so far this year in terms of acquisition volume. Sovran closed on 29 out of the 30 facilities it put under contract in January for a total of $400 million. The last property of the bunch is scheduled to close next week.
That deal put Sovran into California for the first time, where it continues to look for additional opportunities, including an additional facility in Los Angeles it purchased afterwards for $17 million.
The company has three more properties, two in Buffalo, NY and one in Dallas, under contract for $20 million.
Selective C of O
In addition, the company acquired at certificate of occupancy a newly built facility in Miami for $11 million, and has four more C of O deals in its pipeline valued at $40 million: two in Chicago, one in Charleston, SC and one in Charlotte, NC. Only one of those is planned for 2017.
Paul Powell, executive vice president, said the company continues to look for more C of O deals in its biggest markets.
“We are just being very selective and somewhat conservative. I would say by the end of the year we hope to have another three to five that would take us into 2017,” Powell said.
Paul said the company is considering some joint venture development projects in the boroughs of New York City as well and has recently toured several potential sites.
Sovran reported strong results for the first quarter, increasing revenue 16 percent over last year to a total of $91.5 million. Net income rose 25 percent to $28.2 million during the same period. At same-store locations revenue grew 6.6 percent, while net operating income grew 9.7 percent
Sovran ended the quarter at 91 percent occupancy at same-store locations, two basis points below the end of the first quarter last year. Rent grew 5.3 percent during the same period.