Wells Fargo Removes Buy Ratings on Two Self Storage REIT’s

Wells Fargo downgraded two more Self Storage REIT companies this morning (1-17-2014) by removing Buy ratings on Sovran Self Storage (SSS) and CubeSmart (CUBE) after recent healthy investment returns (relative to the sector) for both companies.

In addition to valuation for SSS, Wells Fargo notes potential lower for same-store results and the team’s FFO growth estimate for 2014 at 8.5% vs. consensus 9.3%. Also in the peer-group is Hold-rated Public Storage (PSA), which Wells Fargo expects will grow FFO just 7.3% this year.

Wells Fargo is the fourth largest bank in the US by assets and the second largest bank by market capitalization.

Source: http://www.streetinsider.com

For more information about the self storage business, please contact San Clemente Self Storage at 949-366-1133.

 

Self Storage REITs – Getting Hammered in the 4th Quarter 2013

Wallstreet can be a brutal place and the Self Storage REITs, the “darlings of the REIT world for the past 10 years”, are starting to feel a little pain here in the 4th quarter of 2013. As of November 25, 2013, the REITs have given back more than 50% of their gains from the end of the 3rd Quarter 2013.  Can we say “Ouch”.

4th SELF -STORAGE REIT REPORT 11-25-2013

Interest Rate Concerns – Hurt the Self Storage REIT Prices

Concerns over interest rate increases in 2014 seem be one of the overriding concerns in the REIT Industry.  It remains to be seen if the Self Storage REITs will be hurt.  Reports from all of the self storage REIT companies seem to indicate that they plan on increasing prices next year and are hopeful to improve occupancy levels in existing facilities and healthy growth through acquisition.

 

 

 

Investing in Self Storage – Try a REIT

Consider Self Storage Investment

Have you ever thought about investing in a Self Storage Facility? Well for most of us, buying a building for millions of dollars is out of the question.  But, there is an opportunity to be an investor in the Self Storage Industry by purchasing a share in a Self Storage Real Estate Investment Trust (REIT).

The Four Publicly traded Self Storage REITs: 

Public Storage
Extra Space
CubeSmart
Sovran (Uncle Bobs Storage)

Check out the REIT financial returns compared to other investments in 2013.

Self Storage REIT Q3 2013 ReportDid you know that the Self Storage Sector has been the BEST performing sector of all REITs over the past 10 years!  Not to mention they are poised very well to conquer the a very fragmented industry over the next 10 years — meaning this —

  • 84% of the Self Storage Industry is owned by “Mom and Pop” operators – who own less than 3 buildings.
  • Mom and Pop operators are horrible at internet marketing
  • Over 60% of new Self Storage Business is coming from the Internet
  • Self Storage REITs have entire divisions of people optimizing web pages – They dominate page one results now!
  • Self Storage REIT facilities have over 90% occupancy vs. Mom and Pops in the low 80% range

What does this mean? As the Mom and Pops continue to get squeezed off of page one, their occupancy levels will continue to drop — meaning that they will be forced to sell their asset – and guess who will be the buyer will be – one of the REITs!!!.   Note: growth through acquisition is really the only play in the Self Storage Industry because new development is at a standstill due to difficult underwriting conditions, high cost of land, and City/Community resistance to the asset (100,000 square foot buildings that only employ 3 people).

Self Storage REITs offer an opportunity to invest in the self storage industry.  As one diversifies their portfolio, you might want to invest in this type of asset.  At the end of the day, 1 out of 10 American households is renting a storage unit (1 out of 16 in 1996) and the number continues to grow.

Self Storage REITs 3rd Quarter YTD Same Store Financial Results – STRONG

Q3-2013 REIT

The 3rd Quarter 2013 YTD REIT Self Storage sector Same Store financial results are in, and it appears that the industry is poised to have a banner year!  All 4 major companies reported substantial gains in Revenues, Net Income, and Occupancy.  In fact, for time in many years, Occupancy levels are now above 90%!

3rdQtr2013REIT

Self Storage Industry in 2013

Existing (or same store) self storage facilities are benefiting from the fact that there has been very little new development since 2008, resulting in no new competition coming into their existing market places, and the fact the American consumers continue to purchase new items causing a need for storage.

Internet and Self Storage Search

As Americans continue to use the internet to find local companies, having high search result rankings has never been more important.  Self Storage Industry statics report that nearly 60% off all new tenants are coming from internet search results.  The REITs are benefiting from this search practice because they are typically out ranking independent operators who do not have large budgets to engage expensive Search Engine Optimization companies.

Continued Growth Seen Ahead

The strong financial seen above for the REITs should continue.  Pent up demand by American consumers should remain strong for existing self storage space due to the fact new development is limited.  Additionally, REIT purchases of independent self storage operators that feel financial pressures due to poor internet marketing results is on the rise.  In essence, the REITs are in a “perfect storm” – new competition to the market is limited (no new space being built), the REITs are able to “gobble up” smaller competitors, and demand for the product is growing!

 

 

Ultimate Surfer Storage Unit

Surfer-Storage-Unit

Ultimate Surfer Storage Unit

San Clemente offers some of the best surfing in the United States.  At San Clemente Self Storage we rent out several of our storage units to surfers for the storage of their surf boards – are we not looking at the Ultimate “Man Cave”!

Our storage units don’t exactly look like storage space above, but, they definitely could be decorated in a similar fashion. Storage Units can be used for a variety of purposes, including the storage of surfboards.  If you need storage in San Clemente, we offer affordable, clean, and secure self storage in a beautiful storage facility that has Ocean and Golf Course Views.  Give us a call today at 949-366-1133.

Check out the San Clemente surfboard storage unit solution below!

Surfboards in Storage

Surfboard Storage Unit Solutions

 

 

 

 

Federal Reserve Continues – Easing of Debt

Last week, the Federal Reserve surprised most market observers by choosing to continue their $85 billion per month bond-buying program (Quantitative Easing); thus continuing their commitment to reduce our national debt and improve our economic recovery. This action countered consensus expectations the Fed would begin tapering asset purchases to $70-75 billion per month.

While acknowledging steady, broad-based economic growth, the Fed’s statement cites lingering concerns about the effect of fiscal tightening, the depressed level of labor force participation, flat wage growth, and the impact of higher mortgage rates on the housing market recovery.

Fed’s Easing Policy – Seems to be Working for the Short Term

The Stock Markets are hitting highs that we have not seen for 10 years and the  unemployement is down to 7.3%.  Recent tax increases and federal budget cuts, including the sequester, the across-the-board cuts that took effect earlier this year, will reduct debt in the short-term, according to the CBO.  The annual deficit will fall to 2% of GDP by 2015. And by 2018 federal debt held by the public will fall to 68% of GDP, down from 73% now.

Long Term – CBO Warns National Debt is On Unsustainable Path

Unsubstainable Debt

CBO – Unsubstainable Debt

The Congressional Budget Office said Tuesday the nation’s debt is on an unsustainable path and warned that by 2038 if current law continues federal debt held by the public would hit 100% of GDP.

The nonpartisan CBO added by the same time frame if no action by Congress is taken entitlement spending would increase to 14% of GDP, or twice the average over the last 40 years, and the annual deficit would grow to 6.5% GDP, bigger than any year between 1947 and 2008.

“The unsustainable nature of the federal government’s current tax and spending policies presents lawmakers and the public with difficult choices,” the CBO wrote in its latest report on the long-term budget outlook.

Despite the downgrade of its view on current economic conditions and lower expectations for the near-term outlook, the Fed’s decision to maintain the quantitative easing (QE) program rallied both equity and bond markets to high levels that we have not seen for many years.

Uncertainty – October is Always Interesting The Fed’s decision to maintain the status-quo does little to alleviate uncertainty in the economy. With a new Fed chief coming on board, Congress set to debate over the debt ceiling in less than two weeks, and renewed conjecture as to the start date of tapering, the capital markets will likely prove volatile through the end of the year.

Self Storage Markets

The continued easing by the Fed should keep interest rates down, which is a good thing if you are trying to get a new self storage loan (we remember a few years ago  there was very little financing available).  However, the battle ahead in Congress is going to be very important to all Americans.  Lowering the Nation’s debt levels is sure to put pressure on all of us.

Sources:

Marcus & Millichap Real Estate Investment Services

Read more:CBO Warns National Debt is On Unsustainable Path

Self Storage in Germany?

There are over 50,000 self storage facilities in the United States servicing a population of approximately 314 million people. In Germany, there are approximately 60, according to the Association of German self storage companies.  The first self storage facility in Germany opened a short decade ago. The Pioneer was the Austrian company Myplace, which has now 21 stores, with three more are under construction.

Self Storage GermanyIt is hard to imagine only 60 – servicing  approximately 82 million people.  

America must be self storage crazy!  If you need to store your car or personal items, give San Clemente Self Storage a call today at 949-366-1133.

Self Storage REITs – Great 2nd Quarter 2013 Numbers

Self Storage REITs

2013 Continues to Be a Great Year for the Self Storage Industry

New statistics recently released by the National Association of Real Estate Investment Trusts (NAREIT) show that the top 4 Self Storage REITs are showing very strong financial numbers in 2013.  For the first 7 months of this year, as a group, the self storage REITs posted a 12.7 percent gain, placing the Industry only second in the United States REIT Real Estate Trust Industry to The Lodging and Resorts sector which showed a 16.6 percent return.

Self Storage REITs- 2nd Quarter 2013 Results

REITs 2nd Qtr 2013 Results

According to MJPartners, Net income growth for the top 4 Self Storage REITs was reported at ranging between 8.4% to 13.1%.  Additionally, same store revenue increases were seen at 5.1% to 9.0% and  occupancy levels reached over 90% for each public company.

Time To Rent a Storage Unit

As the numbers industry wide continue to improve for the Self Storage business, rental incentives such as rental discounts or free rent are sure to disappear. Before this occurs, now would be a good time to rent a storage unit.  Although San Clemente Self Storage has one of the highest occupancy rates in the industry at 97%, we are still offering two great rental incentives – a fixed 15% Rent Discount and the Free Use of Our Moving Truck and Driver.  Time is of the essence to take advantage of these rental incentives, give San Clemente Self Storage a call today at 949-366-1133.

 

 

Self Storage Industry – Which Metro Area is Over Built?

Most Overbuilt Self Storage Marketplace in the USA?

Supply vs.DemandAccording to Commercial real estate firm Cushman & Wakefield, the Dallas-Fort Worth metro area appears to be overbuilt when compared to other areas of the United States. The Dallas-Fort Worth area has one storage unit per 5.5 household compared to 7.6 households located in the top 50 US metro areas.  Additionally, according to MiniCo Insurance Agency ( a specialty Self Storage Insurance provider) the Dallas-Fort Worth area has held be the leader of self storage units sense 2005.

It is interesting to note that the National average of households per storage unit is approximately 1 out of 10, compared to 1 out of 16 in 1997.

San Clemente Self Storage Marketplace

There are 5 self storage facilities in the City of San Clemente, with approximately 2,600 storage units, the largest of which is San Clemente Self Storage that has 707 storage units. The most recent census shows that there are 23,906 households in San Clemente, resulting in 1 storage unit per 9.1 households.