The third-party management program run by self-storage REIT Life Storage Inc. is ratcheting up its rivalry with CubeSmart and Extra Space Storage Inc.
During a May 3 earnings call with Wall Street analysts, CEO David Rogers said Life Storage’s third-party management program is on track to add as many as 75 facilities this year. By comparison, the Williamsville, NY-based REIT picked up only 18 third-party facilities in 2017.
In its 2018 quest for third-party management customers, Williamsville, NY-based Life Storage is frequently crossing paths with Malvern, PA-based CubeSmart and Salt Lake City, UT-based Extra Space, he said.
“And I’m sure they run across us more lately than they have,” Rogers added.
But while the three REITs are pursuing many of the same facilities for third-party management, Life Storage is being perhaps a bit more selective than CubeSmart and Extra Space are.
“We tend only to entertain contracts in markets where we have a presence,” Rogers said.
Seeking to achieve scale
Therefore, CubeSmart and Extra Space might be winning a “bunch” of third-party deals that aren’t on Life Storage’s radar, according to Rogers.
“We’re not going to be able to help new clients if we’ve only got one or two stores in the market. The whole part of this thing is scale,” he said.
Rogers added: “I think Extra Space, especially, is not necessarily afraid to go into a market where they don’t have a presence, and they’ll start one [third-party management deal] up, whereas we are not at that point yet. We want to have scale in the markets.”
Now, Life Storage also must contend with third-party competition from Public Storage. In February, the Glendale, CA-based self-storage REIT signaled its intention to cultivate the third-party management business with its promotion of executive Pete Panos to a newly created role: president of third-party management.
‘Driving new opportunities’
During the first quarter of 2018, Life Storage added 10 facilities to its third-party management program, called Life Storage Solutions. It now manages 145 facilities through joint venture and third-party management agreements.
Why are Life Storage and its self-storage brethren placing more emphasis on third-party management? Because they derive two key benefits from third-party programs — management fees and a pipeline of potential acquisitions.
At Life Storage, third-party management “is driving new opportunities,” Rogers said.
In other first-quarter highlights, Life Storage:
- Grew same-store revenue by 2.5 percent compared with the same period in 2017.
- Increased same-store NOI by 2.5 percent compared with the same period in 2017.
- Grew average same-store occupancy by 150 basis points to 91.1 percent compared with the same period in 2017.
- Saw solid growth in Los Angeles and Sacramento, CA; Las Vegas, NV; most of Florida; Beaumont, TX; upstate New York; and New England.
- Experienced new-supply headwinds in Austin, Dallas and San Antonio, TX; Chicago, IL; and Miami, FL.
- Began “very early” discussions about more joint ventures.