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Comparing the Top 3 Self-Storage REITs after 2Q17 Earnings

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Aug. 25 2017, Published 9:32 p.m. ET

The self-storage REIT sector as a whole

The self-storage REITs that own consumer storage facilities are experiencing solid growth in income and revenues in 2017. The pro-American policies fostered by President Donald Trump has sparked economic growth in the country. As a result, consumers are feeling more optimism as they increase their discretionary spending.

As consumers acquire more possessions, they may need more space to store their excess items. This trend could boost the demand for self-storage properties.

In this series, we’ll analyze the 2Q17 results for the country’s top three self-storage companies—Public Storage (PSA), Extra Space Storage (EXR), and CubeSmart (CUBE).

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Stock price movement

Public Storage’s (PSA) strong fundamentals and consistent rent growth could help boost investors’ optimism about the stock. Although its stock rose 2% in March 2017, the price fell in the first half of 2017. The lower-than-expected results in 1H17 seem to have driven its stock price downward in the past few months.

Extra Storage’s (EXR) stock price, on the other hand, witnessed a decent 9.4% gain for the first six months of 2016. The company’s higher-than-expected performance in 1H17 boosted its stock price. Extra Storage positions its properties in proximity to premium malls and residential communities, which boost demand for the company’s properties.

CubeSmart’s stock price remained almost flat during the first half of 2017 as the company reported higher-than-expected results. Following its strong 1H17, CubeSmart enhanced its FFO (funds from operations) guidance for fiscal 2017. The company also carried out aggressive new leasing activities during the year. These sales-boosting initiatives appear to have increased consumer optimism.

These three self-storage REITs, along with Equity Residential (EQR), comprise ~22% of the iShares Trust – iShares Residential Real Estate Capped ETF (REZ). REZ has 100% exposure to REITs and a low beta score of 0.40x, which indicates that it is less volatile to fluctuations in the economy.

In the next article, we’ll look into the 2Q17 top-line and bottom-line performances of these REITs.

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