A new name is expected to give self-storage operator Sovran Self Storage a competitive boost.
CEO David Rogers said changing the brand name of its self-storage stores from Uncle Bob’s to Life Storage is likely to boost occupancy over the next several months.
“We think it should, over the course of a year or two, come up within the range of a 70 to 125 basis point pop in occupancy,” Rogers said.
The company learned in focus groups that 16 percent of potential customers had an unfavorable opinion of the Uncle Bob’s name. Eliminating those negative connotations should provide a positive boost, Rogers said.
What’s in a name?
The name change is scheduled to officially take place on August 15, and Sovran Self Storage will also change its name. The ticker symbol will change from SSS to LSI.
Rebranding the stores, which includes repainting and new signage, is budgeted to cost $22 million and will be completed by April 2017.
Another expected benefit of the change is more third-party management contracts.
“We’ve had absolute rejections of our contracts solely based on the name,” Rogers said. “That is got us going on the overall change.”
In fact, Rogers said the company has been considering a name change for more than two years. But lacking an alternative name, the company waited. The recent $1.3 billion acquisition of 84 stores from Life Storage presented the perfect opportunity to make the change.
Sovran increased same-store revenue by 5.7 percent during the second quarter compared to the same period last year. NOI rose 6.8 percent.
Same-store occupancy during the quarter was an average of 92.3 percent, up 30 basis points from last year. Rent per occupied square foot ticked up 5 percent at same-store locations to a total of $13.05
In some markets, Sovran saw that potential customers starting to push back against rising rates.
Rate push back
“Around Memorial Day, certain markets had potential new customers pushing back on street rates and our [revenue management] group saw our competitors in those areas dropping their rates and boosting incentives,” said David Rogers, CEO of parent company Sovran Self Storage during the REIT’s recent quarterly conference call with analysts.
Those underperforming markets include New England, Buffalo, New Orleans and Cleveland.
As a result Sovran reduced its revenue expectations for its same-store portfolio.
“We’ll see growth, but not at quite the levels we’ve enjoyed,” Rogers said. “I guess that’s one consequence of 20-some quarters of consistent outsized revenue growth in non-inflationary times.”
Meanwhile existing customers are less sensitive to price increases, and customers are sticking around longer than ever before.
Sixty percent of Sovran’s customers stay in storage for more than a year, and another 44 percent stay for more than two years.
“It doesn’t appear we’re going to have trouble in the near future with customer retention,” said chief operating officer Ed Killeen during the same conference call.
During the recent quarter, Sovran increased the rent of 29,000 existing customers—the largest number of increases the company has ever done during a single quarter.
“The move out rate was 11.3 percent, versus 12.5 percent last year, and they’ve received a pretty hefty increase as well. Retaining those customers that truly need storage, really has been a non-issue,” Killeen said.