Unlike some of its industry peers, self-storage REIT Life Storage has delivered a fairly rosy outlook for 2020.
Both CubeSmart and Extra Space Storage are forecasting anemic financial performance in 2020. On the other hand, Life Storage actually has boosted this year’s forecast.
Increased optimism
On Oct. 30, Williamsville, NY-based Life Storage projected same-store revenue growth of 1.25 percent to 2.5 percent in 2020. On Feb. 19, Life Storage lifted that range to between 1.5 percent and 2.5 percent. Meanwhile, the range for same-store NOI growth has climbed from a range of 2 percent to 3 percent to a range of 2.25 percent to 3.25 percent.
Life Storage also bumped up its anticipated growth in same-store operating expenses. The range was 0.25 percent to 1.25 percent. Now, it’s 0.50 percent to 1.5 percent.
For 2019, same-store revenue growth was 2.2 percent, while same-store NOI growth was 3 percent and same-store operating expense growth was 0.8 percent.
Biggest markets clear the peak
Speaking Feb. 20 to Wall Street analysts, CEO Joe Saffire attributed the improved 2020 outlook to surprisingly good results in the fourth quarter of 2019 as well as to optimism that Life Storage has overcome the new-delivery peak in some of its biggest markets. He said the REIT sees “positive trends” in Buffalo, NY; Chicago, IL; Las Vegas, NV; and Los Angeles, CA.
Additionally, markets like Austin and San Antonio, TX, and Miami and Tampa, FL, are experiencing “sequential improvement” following an influx of new supply, Saffire said.
Acquisition outlook
Aside from adjusting its financial projections for 2020, Life Storage has increased its potential spending on wholly owned acquisitions. The REIT had anticipated earmarking $200 million for acquisitions this year. The new forecast is $200 million to $300 million. In 2019, Life Storage spent almost $424.6 million on acquisitions.
Saffire said competition for good deals remains stiff.
“I think there’s opportunities to get deals off market,” he said. “You’re not competing. It’s not going out to bid. There’s no broker involved.”
Expanding beyond Canada?
As for international expansion, Saffire said Life Storage doesn’t plan to explore opportunities beyond the U.S. and Canada, at least for now. Last year, the REIT broke into the Toronto market with the addition of four facilities to its third-party management program.
“I think there’s a lot we need to do in the U.S. and still a lot of opportunities. I think Canada was a no-brainer for us, and we’re doing well there,” Saffire said. “We’ll see where that goes this year.”
Other highlights of Life Storage’s 2019 performance:
- Same-store occupancy declined to 89.6 percent, compared with 89.9 percent in 2018.
- The third-party management program added a net 84 facilities, ending the year with a total of 297.
- The company sold 32 facilities for $212 million.
