Life Storage Inc. is in the midst of two initiatives that could bolster the self-storage REIT’s bottom line — it’s seeking a buyer or joint venture partner for 30 to 60 of its non-core facilities, and it’s rolling out a self-service offering called Rent Now.
During the REIT’s second-quarter earnings call, CEO David Rogers revealed that Life Storage is taking advantage of strong interest in self-storage acquisitions to either sell the 30 to 60 facilities outright or recruit a joint venture partner that would own a majority stake in the portfolio.
“We are in the early phase of these endeavors,” Rogers told Wall Street analysts, “and there is no assurance that we will achieve either the pricing or the opportunity we need to pull the trigger.”
No “fish on the line”
Rogers said Life Storage had been talking to three potential buyers or joint venture partners “more or less exclusively” over the past two months about the potential 30- to 60-facility deal, and the company expects to reach out to a few others.
“If we don’t see much progress in the very, very near future, we will probably open it up [to more prospective investors],” Rogers said. “So, we don’t have a fish on the line, we don’t have a partner in the queue.”
Williamsville, NY-based Life Storage operates more than 700 self-storage facilities in 28 states.
Life Storage rolls out Rent Now
During the earnings call, Rogers also discussed the REIT’s new Rent Now program.
Following a 60-day test of the concept at 15 facilities near its headquarters, Life Storage expanded Rent Now to 142 facilities that are in the New York City, NY, market; the Austin, Dallas-Fort Worth and San Antonio markets in Texas; the Jacksonville, Miami and Tampa-St. Petersburg markets in Florida; the Richmond, VA, market; and the St. Louis, MO, market. Rogers said Rent Now is expected to be available at all of the REIT’s facilities in early 2019.
“We found that a growing segment of our customers prefer to self-serve and complete the rental process completely online,” Rogers said. “One of our top priorities is to make it easy for our customers to engage with us, and the Rent Now app makes this possible.”
Rogers likened Rent Now to rental car companies, hotels and other businesses enabling customers to transact all of their business online or on mobile apps.
In introducing Rent Now, Life Storage explained that a customer can now “skip the counter” by picking a storage unit, filling out a rental agreement and making a rental payment online. The customer then receives a property access code via a mobile device, along with step-by-step directions on a digital map.
“Consumer behavior is changing rapidly. Leveraging technology to transact in ways that are expected by these consumers, while also efficiently selling inventory at our owned and managed properties, is a win for each of our customers, partners and shareholders,” Ed Killeen, chief operating officer at Life Storage, said in the Rent Now announcement.
Other second-quarter developments include:
- Same-store revenue climbed 4 percent compared with the same period in 2017, with revenue growth being notched in 29 of the 33 major same-store markets.
- Same-store NOI rose by 5.2 percent compared with the same period last year. Las Vegas, NV; Sacramento, CA; and Orlando, FL, were among the top markets for NOI growth.
- Same-storage operating expenses increased 1.5 percent versus the same period in 2017.
- Property taxes jumped 6 percent during the quarter, with significant hikes in Austin and St. Louis, as well as Houston, TX, and some Florida markets.
- Average same-store occupancy increased 20 basis points to 91.9 percent.
- Internet marketing costs went down by 12.2 percent.
- Seven facilities were added to the third-party management platform.
- The Austin, Dallas-Fort Worth and San Antonio markets “continue to fight their way through supply issues,” Rogers said.