Cost-cutting Rent Now platform boosts Life Storage’s 2020 forecast

John Egan
November 3, 2019

As it continues to achieve cost savings from its Rent Now self-service rental platform and other measures, self-storage REIT Life Storage predicts a 1.25 percent and 2.25 percent upswing in same-store revenue next year.

During its third-quarter earnings call Oct. 31, Life Storage leapfrogged its rivals by being the first publicly traded storage REIT to project financial results for 2020. Next-year forecasts traditionally happen later in the current fiscal year.

Controlling overhead costs

For 2019, Life Storage expects same-store revenue to jump 1.75 percent to 2.25 percent. Aside from a 1.25 percent to 2.25 percent bump in same-store revenue next year, Life Storage envisions 2 percent to 3 percent growth in same-store NOI, and a 5 percent to 6 percent hike in property taxes.

“We know that we can’t control property taxes, but we really can control our overhead cost[s], and that’s really the premise of 2020,” CEO Joe Saffire told Wall Street analysts.

Excluding property taxes, the Williamsville, NY-based company forecasts expenses will fall 1.75 percent to 2.75 percent next year, thanks to savings generated through its Rent Now online rental platform and “continued discipline” in trimming operating costs, Chief Financial Officer Andy Gregoire said.

“We do expect these reductions to more than offset the pressure from internet-marketing cost increases,” Gregoire said.

Rave review for Rent Now

Saffire said that since Life Storage launched Rent Now in 2018, the company has reduced payroll costs more quickly than executives had anticipated.

Rent Now accounts for about 10 percent of move-ins, he said, meaning tenants aren’t making reservations through Life Storage’s call center and or with store employees. The fully digital platform lets a customer pick a storage unit, fill out a rental agreement and make a rental payment. Then the tenant receives a property access code and step-by-step directions to the newly rented unit via mobile device.

While Life Storage is seeing positive results from Rent Now, it’s “embracing other technologies to really improve the efficiencies at the store level, to really drive down the number of [full-time employees] per store that we currently have,” Saffire said.

For instance, Life Storage installed new software this year designed to more efficiently manage repair and maintenance projects, Saffire said.

“We’re very confident in what we have projected for 2020 because there are savings we’re already realizing in the third quarter,” Saffire said. “We’ll see it in the fourth quarter, and we’re going to carry it on into 2020.”

Spending in 2020

Gregoire said that similar to this year, Life Storage expects the following levels of spending in 2020:

  • About $200 million worth of acquisitions.
  • Between $40 million and $55 million in expansions and upgrades.
  • Between $20 million and $25 million in joint-venture investments.
  • General and administrative expenses of $48 million to $50 million.

Other highlights of Life Storage’s third quarter:

  • Same-store revenue increased 1.8 percent versus the same time in 2018.
  • Same-store NOI climbed 2.6 percent compared with the same period a year ago.
  • Same-store operating expenses rose 0.2 percent versus the same period last year.
  • Markets that posted the strongest growth in same-store revenue were Chicago, IL; Las Vegas, NV; Buffalo and New York City, NY; Los Angeles, CA; and New England.
  • 22 facilities were purchased for $281.7 million.
  • 32 facilities were sold for $212.2 million.
  • A joint venture was formed with Charlotte, NC-based developer Childress Klein Properties Inc., with Life Storage now holding a 40 percent stake in six former SpaceMax facilities in the Atlanta, GA, market. Life Storage paid $16.5 million for the ownership share.
  • 50 facilities (net) were added to the third-party management platform.

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