Storage units rebounding, CubeSmart says

Posted: July 15, 2013

CubeSmart, of Wayne, a self-storage company in a nation of pack rats, has rebounded from the industry's dark days, when a glut of storage units flooded the market.

After its stock price bottomed out around $1.35 during the recession, CubeSmart's shares closed Friday at $16.92, up eight cents, and analysts say the fundamentals for the self-storage industry seem solid.

Christopher Marr, CubeSmart's president and chief operating officer, said Friday the self-storage industry was doing "extremely well" because of a stronger housing market, lower unemployment, and higher consumer confidence.

Change - new jobs, lost jobs, kids going to college, sick parents, new homes or sold homes - leads to storage needs, say analysts and industry executives.

People also keep coming up with new uses. Small businesses lease storage units as flexible warehouse space for tools, machinery, medications, and DVDs.

The self-storage industry, meanwhile, hasn't repeated the self-inflicted wound of overbuilding, Marr and analysts say. This has resulted in higher utilization and less discounting. CubeSmart's utilization rate climbed to 84.4 percent in 2012 from 78.4 percent in 2011. Wall Street values the company at $2.2 billion.

"It's not a one-hit wonder," Aaron Swerdlin, executive managing director of the real estate service firm Newmark Grubb Knight Frank, said of the self-storage industry. CubeSmart and peer self-storage companies are considered real estate investment trusts, or REITs.

In January, Marr will take the chief executive officer post at CubeSmart, replacing self-storage entrepreneur Dean Jernigan.

Jernigan previously built and sold Storage USA Inc. He joined U-Store-It Trust in Cleveland in 2006 and relocated the company's headquarters to Philadelphia's western suburbs. There are 180 employees there.

Marr worked for Jernigan at Storage USA and then served as chief financial officer at Brandywine Realty Trust. He jumped to rejoin Jernigan.

As part of the "rebuilding" of U-Store-It, which has become CubeSmart, the company fixed its balance sheet, improved its credit rating, and acquired a portfolio of storage units in the New York area. The optimal market for a storage company is one with apartments, where people constantly move. New York and Florida, for example, are big markets.

"It's a simple business. You are renting garages," said Rod Petrik, REIT analyst for Stifel Nicolaus & Co.

Publicly traded companies with their financial resources seem to have a competitive advantage over privately owned storage companies, analysts say.

"The industry is doing really well," said Paul Adornato, a senior analyst with BMO Capital Markets in New York. "People don't have enough closets, and Americans are pack rats."


Contact Bob Fernandez at 215-854-5897 or bob.fernandez@phillynews.com or follow on Twitter @bobfernandez1.

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