David Rogers thinks this is a good time to be in the self-storage business.
The economy is recovering, the real estate market is on the upswing, and consumers are starting to move around again.
All of that creates a good environment for self-storage units, including the 489 Uncle Bob’s stores that Sovran operates, mainly in the Eastern half of the United States.
Sovran’s storage facilities are nearly 90 percent filled, and with customer demand on the rise, Rogers thinks Sovran will be able to keep raising its rental rates for existing customers and offer fewer discounts to attract new ones.
“We’ve had a really good growth rate,” with Sovran’s earnings expanding at an average annual pace of 16 percent since 2009, Rogers told shareholders at the company’s annual meeting Thursday. “We really don’t see any signs of it slowing down.”
That was apparent during the first quarter, normally the slowest time of the year in the self-storage business. Sovran’s first-quarter earnings jumped by 14 percent, buoyed by a 6 percent increase in rents and occupancy levels that strengthened to 89.4 percent at stores that have been open for at least a year, up from 86 percent a year ago.
Occupancy levels are likely to top 90 percent during the busy season this summer, and Rogers thinks the company ultimately could handle occupancy rates as high as 94 percent.
Since the recession ended, Sovran has resumed the acquisition program that it used during the previous three decades to build its business. The company purchased 15 facilities last year and is on track to close on deals for 14 more, at a combined cost of $90 million, before the end of June, Rogers said. “We’re buying bigger stores in bigger markets,” he added.
With the company having access to nearly $500 million in cash, borrowing capacity and funds from potential stock sales, Sovran has the ability to make additional purchases, said Andrew Gregoire, the firm’s chief financial officer.
“But we’re not just going to grow for the sake of growing,” he said.
Indeed, Rogers said the strength in the self-storage industry has inflated the prices on many facilities that are up for sale. “It’s pretty rich,” he said. “It’s very competitive. It’s a popular product.”
As a result, Sovran also is making investments to expand and upgrade many of its existing Uncle Bob’s stores, including eight in the Buffalo market. Those expansions typically involve the addition of about 20,000 square feet of new rental space and include premium features, such as climate control.