We’re living in a material world, and all that stuff has to go somewhere. A thriving consumer culture combined with frequent moving has led to an explosion of self-storage businesses.
The industry has come a long way from barren rows of metal sheds and now meets the needs of consumers seeking a climate-controlled unit, the option of online bill payment, and electronic gate access for added security. Plus, it’s an attractive business model for investors.
The self-storage industry also is very competitive, with new facilities popping up at a pace that might seem unstainable to meet growing market demand. That makes established players with long records and deep pockets even more compelling. Let’s take a look at this one.
Extra Space Storage company profile
Based in Salt Lake City, Extra Space Storage (NYSE: EXR) was founded in 1977 and went public in 2004. The firm currently operates more than 1,850 self-storage properties in 43 states, Washington, D.C. and Puerto Rico. That includes wholly-owned properties, joint ventures, and third-party management of more than 1,010,000 units comprising some 585 million square feet of rentable storage, including personal storage, boat storage, RV storage, and business storage.
Extra Space Storage operates more than 500 of those locations through its ManagementPlus arm, which it says is the industry’s largest third-party management service. The owners of those locations have more than 920,000 customers and are supported by digital marketing, a call center focused on customer conversions, and a high-performing technology platform, the company says.Extra Space Storage news
While operating in a relatively recession-resistant niche, Extra Space Storage has a lot of competitors, all dependent on short-term leases, unlike other commercial, office, and industrial REITs where the commitments are typically for several years or longer, not month to month.
While it has a long record of profitability and payouts, the Utah-based company still has major competition among REITs, notably including Life Storage (NYSE: LSI), Cubesmart (NYSE: Cube) and the largest player in storage space, Public Storage (NYSE: PSA).
To continue its strong performance, Extra Space Storage says it strives to provide consistent growth and a diversified revenue stream through its joint ventures, third-party management services, customer acquisition and service platforms, efficient revenue management, and accretive growth that has included $6.8 billion in acquisitions in the past 10 years.
The results seem to be there. Extra Space Storage says it has increased shareholder value more than any other self-storage peer or any other publicly traded REIT across all property types, over the past decade, with a 10-year total shareholder return of 1,167%.
Extra Space Storage stock price
Extra Space Storage stock took a hit like most everyone else in April but has since bounced back from a low of about $74 a share to about $105 a share.
But dividends have risen by more than 50% over the past five years, from $0.59 a share in 2015 to $0.90 a share in the second quarter, the same as it has for the past several quarters.
For the first six months of 2020, core FFO was $2.48 per diluted share, up 4.6% from the same period in 2019, while same-store revenue and same-store NOI dipped 0.6% and 1.8%, respectively.
Same-store occupancy rose to 95.7% as of July 31, 2020, from 94.2% on July 31, 2019, while accounts receivable less than 60 days have returned to historical levels, the company said in its second-quarter report.
The balance sheet also appears to be fine, with $56.4 million in cash and cash equivalents and $883.0 million in revolving line of credit availability.
That said, the company CEO, Joe Margolis, said in the second-quarter report that restrictions on raising rents and holding auctions as well as the macro-economic effect of the COVID-19 pandemic have prompted Extra Space Storage to not provide any more guidance for 2020.
The bottom line on Extra Space Storage
Extra Space Storage hits a lot of the high notes for a lot of financial reasons, and it throws in an added twist: a solid record for the investor-focused and socially minded.
The company has solar installations at more than 400 of its properties and hundreds more in the works, earning it national accolades while already saving enough energy to power more than 10,000 homes a year.
Its workforce of approximately 4,000 people also are employed by a company that was ranked number 90 out of more than 1 million employers by reviewers on Glassdoor. That presumably makes it more likely to encounter friendly staff in the building, always a plus for a place that relies on rent from consumers who have other options.
Most of the senior executives have been there for 10 years or more, and the company also touts the fact that two-thirds of its board are independent directors and that 22% are women, and that there’s a separate chairman and CEO, and an annual advisory vote to approve executive compensation. The company also carries a BBB Stable Outlook from S&P and has been a member of the S&P 500 Index since 2016, giving it additional exposure to all those indexes that buy huge amounts of stock.
All that and a sustainable business model -- all those individual storage units full of personal belongings plus the demand for boat storage and RV storage -- in a business that has proven resistant through two major downturns in the past decade make Extra Space Storage a good candidate for buy-and-hold consideration.