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Overview of Self-Storage REITs’ Development Activities in 2Q17

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Aug. 25 2017, Published 8:32 p.m. ET

Why REITs undertake development

To maintain profitability and have the edge over competitors, self-storage REITs undertake a variety of development projects and expansionary activities with their properties. These REITs position their properties in premium locations with proximity to shopping malls and office areas with high income growth, boosting demand for their properties.

Let’s have a look at the investment activities carried out by the three leading storage REITs in 2Q17.

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PSA’s investment strategy during 2Q17

In 2Q17, Public Storage (PSA) spent ~$11.2 million for repair and maintenance of its properties, 10.3% higher than its expenditures in 2Q16. During 2Q17, PSA took over three self-storage facilities valued at $11.6 million. These facilities are located in Indiana and Ohio, spanning more than 0.2 million net rentable square feet.

After 2Q17, PSA inked a contract to acquire seven properties in Florida, South Carolina, North Carolina, Kentucky, and Ohio valued at $47.1 million.

PSA completed a development project and several expansion projects during the quarter. After 2Q17, PSA reported several projects in the pipeline, with estimated costs of more than $500.0 million to be incurred throughout the year.

Express Storage development projects in 2Q17

Express Storage (EXR) acquired four storage facilities during 2Q17 worth $43.8 million. The company took over two stores for $18.6 million and is scheduled to close the takeover of five stores for $52.8 million in 2017. EXR took over three stores in a joint venture worth $32.0 million during the quarter.

CubeSmart capital deployment in Q2

During 1H17, CubeSmart acquired two properties located in Maryland and California worth $21.9 million. It also took over two properties in a joint venture in Illinois worth $31.0 million during 2Q17.

CubeSmart undertook several development projects that were either wholly owned or part of the joint venture during 2Q17. CubeSmart also has eight development projects in the pipeline through 2Q17.

The Vanguard REIT ETF (VNQ), with 98% exposure to REITs, has more than 10% of its portfolio invested in EXR, PSA, CUBE, and Equity Residential (EQR). This ETF has a net asset value of ~84.2x.

In the next article, we’ll examine the balance sheet positions of the three REITs.

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