They say everything’s bigger in Texas.

For self-storage REIT Life Storage Inc., that translates into bigger competitive challenges in 2018 and 2019 in its four big Texas markets — Austin, Dallas, Houston and San Antonio.

During a Feb. 22 call with Wall Street analysts, CEO David Rogers said new supply coming online will hit Life Storage’s four major Texas markets especially hard. Those markets represent 23 percent of Life Storage’s same-store portfolio.

Rogers explained that Williamsville, NY-based Life Storage operates 116 wholly owned facilities in those four Texas markets, where 77 competing facilities have opened in the past 24 months. Another 39 competing facilities are slated to open within the next 18 months, he said.

As a result, 93 of Life Storage’s Texas facilities should feel “a somewhat adverse effect” from new supply going into 2019, Rogers said.

But, he added, “these are rapidly growing, vibrant markets that are ideal for self-storage. It’s a cyclical drag that’s causing us some pain now, but mid- to long-term, we love these big Texas cities and expect to benefit from our strong presence there.”

Other Life Storage markets being dogged by concerns about oversupply include Chicago, IL; Denver, CO; Miami, FL; and Phoenix, AZ.

Rogers acknowledged the need for some of the REIT’s markets to absorb recently built facilities while other markets are on the verge of confronting supply headwinds.

“But demand is there,” he added, “and the tools are in a kit for Life Storage to perform well even in this competitive part of the cycle.”

Here are some of Life Storage’s financial highlights for 2017 and 2018:

  • Revenue growth in 2018 is projected to be 1 percent to 2 percent compared with 2017.
  • NOI growth in 2018 is expected to be 0.7 percent to 1.75 percent compared with 2017.
  • Same-store revenue rose by 1.7 percent last year compared with 2016, and same-store NOI inched up by 0.6 percent.
  • In 2017, the REIT bought 29 facilities with joint venture partners for a total cost of $549.9 million, and two certificate-of-occupancy facilities on its own for $22.2 million.
  • Eighteen facilities were added to Life Storage’s third-party management platform last year, with another 15 currently under contract.
  • During the fourth quarter of 2017, Life Storage sold its only Utah facility — an 86,000-square-foot property in Salt Lake City — for $9.4 million.
  • Life Storage plans to complete $40 million to $50 million worth of expansions in 2018.
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