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From the Spare Foot Blog: Public Storage Building 60 New Facilities

Aug 17, 2015

From the Spare Foot blog Storage Beat:

With occupancy at its highest level ever, Public Storage is filling up new self-storage facilities about as fast as it can build them. (Public Storage sources say that 22 of the planned facilities will be built in the Dallas MSA alone.)

“We opened a new facility in Glendale with about 2,000 units at the end of April, and it’s already 50 percent occupied in about two months,” Ron Havner, chairman, president and CEO of the Glendale, CA-based REIT, said during a conference call July 30 with Wall Street analysts.

Overall occupancy at the company’s same-store locations stood at 95.7 percent at the end of the second quarter.

Most regional and local operators that we talk to are all developing, whether it’s one project or five.
— Ron Havner, chairman, president and CEO of Public Storage

That level of demand bodes well for the rest of the company’s development pipeline, which Havner said now stands around 60 projects. The existing slate of projects will cost the company an estimated $402 million and will take until the end of 2016 to complete, Havner said. Meanwhile, the company still is hunting for development opportunities.

“The team has got their track shoes on, and they are going around the track about as fast as they can,” Havner said. “There is a continuous in-out process on that pipeline of deliveries and the new projects coming into it.”

Accelerating development

Havner said development across the self-storage sector is gathering steam.

“If you look at our development pipeline as a percentage of our portfolio, it’s about 2.7 percent,” Havner said. “So maybe you can extrapolate that to the industry and say the industry is growing at 2.7 percent as a whole.”

That would amount to 1,000 to 1,200 facilities that are in some stage of development across the U.S.

Public Storage

Public Storage has earmarked more than $400 million for the projects in its development pipeline.

“Our observation is that certainly development is accelerating,” Havner said. “Most regional and local operators that we talk to are all developing, whether it’s one project or five.”

Most of the activity is occurring in markets like Texas, Florida and the Carolinas that are experiencing higher-than-average population growth. Cities where obtaining zoning and finding sites is difficult — such as San Francisco, CA, and Miami, FL — are seeing less new development.

Expansion activity

The company opened two new facilities during the quarter and expanded a few existing stores, at a total cost of $27.9 million. In addition to the Glendale facility, the company opened a location in Georgetown, TX.

In addition to building 3.4 million square feet of new facilities, the company has projects in the hopper to expand existing facilities by 500,000 square feet at a cost of $77 million.

Public Storage continues to buy existing facilities as well, acquiring four facilities during the second quarter for $39.9 million. The company says it has three facilities in Colorado and six facilities in Florida under contract for $97 million.

Strong performance

As for its operating results during the quarter, Public Storage grew revenue 10.2 percent compared with the same period last year, rising to $592.6 million. Net income grew 17.8 percent, to $328 million, in the second quarter.

Same-store sales climbed by 6.8 percent compared with the same quarter last year, while same-store profit grew by 9 percent.

Rent per square foot at same-store locations increased to $16.25, up from $15.31 during the same period last year.

About the author:

Alexander Harris (Google+) is a reporter covering the business of self-storage. He obtained his degree in journalism from Virginia Commonwealth University. He loves reading Elmore Leonard novels and listening to classic country music. You can call him Al.


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