By allen kenney
Leasing for the Lifecycle
Ron Havner explains how Public Storage has
prospered renting “garage space”
Investing in storage space doesn’t bring quite the same rush as putting money into hot biotechnology stocks or cutting-edge telecommunications. Yet, for people who invest with the goal of making money over thrill-seeking, many believe that self- storage REITs are a pretty smart play.
Ron Havner, president and CEO of sector leader
Public Storage (NYSE: PSA), readily acknowledges that his
company essentially sells “garage space.” Compound annual
returns between 1999 and 2009 on the order of 18 percent
make Public Storage sound pretty glamorous, though.
“It’s certainly one of the very best forms of commercial
real estate you could own,” Havner says when asked about
the long-term benefits of the self-storage sector.
REIT magazine interviewed Havner about why he thinks
storage REITs—and Public Storage, in particular—are such
a good buy.
We’re the largest company in the sector, with 2,000 properties.
That means there are lots of opportunities to consolidate and
acquire properties in the long term.
REIT: Long term, what do you think makes self storage a
good business to be in?
Ron Havner: Our rents generally are comparable to class-B
apartments in the markets where we operate. Yet, we don’t
have things like plumbing and carpets and painting to worry
about, so we have a very low break-even
point and excellent margins.
In terms of demand drivers, we need
population growth, which has been positive in the United States. If you’re in the
West Coast markets like we are, you get
even more of that.
We also need people “doing things:”
marriages, births, deaths, moves. These activities in people’s lives continue to go on,
no matter what the economy is doing.
Lastly, the self-storage market is highly
fragmented in the United States. There are
a total of 55,000 storage facilities around the
country, but the 10 largest owners account
for approximately 10 percent of that amount.
REIT: Some describe the storage sector as “recession-proof,”
meaning that it is well-protected against the volatility of the
economic cycle. Do you agree?
FAMILY: Wife, LeeAnn, and
“The Big Short: Inside the
by Michael Lewis
FAVORITE MOVIE: “Star Wars”
ACTIVITIES: Supporting my
wife in her community service
and charitable activities
REIT: What, then, would you say is the
biggest challenge your company is facing?
Havner: At the end of the first quarter,
we had more than $700 million in cash,
so one of our bigger challenges is how
to deploy that capital. We haven’t had a
problem dealing with debt maturities and
operating successfully throughout the
challenging economic environment. Now
it’s a matter of finding opportunities.
REIT: Are those opportunities coming to
Havner: I think you’re going to see a
meaningful pickup in transaction activity
thomas michael alleman