Public Storage is a blue-chip with an A rated balance sheet, Extra Space Storage has been a top performer in the past. Investors have seen that trend play out recently. Also, National Storage has seen its share price more than double, leaving its rivals on this list in the dust. The pace of Life Storage's historical dividend growth hasn't been quite as impressive as those of some of its peers, but it's still a notable increase. Real Estate 101. REIT status is also reserved for larger pools of investors. For dividend investors, CubeSmart's 4.2% yield is fairly high, even in the storage space. That's been a winning strategy for the REIT thus far, and it looks poised to continue to succeed going forward. That gives investors a chance to tailor their exposure to match up with the risks they're willing to take and the opportunities they see in the self-storage space. Life Storage, headquartered in Buffalo, New York, was formerly known as Uncle Bob’s. Strategic acquisitions remain prevalent in the self-storage industry and third-party management platforms continue to grow, as noted by a 2019 report on the sector from Jones Lang LaSalle. Public Storage has more than 2,500 locations across the U.S. in 38 states and facilities in western Europe. But when the basement, garage, or shed just won’t cut it, people turn to storage units -- and they do it often. Finally, REIT investors look for income, so it's helpful to know their dividend yield, or the total annual distributions divided by share price. Acquisition activity among the national self storage REITs increased significantly during the third quarter of 2020, and third-party management … There are more than 2,200 Public Storage self-storage locations in the US, Canada and Europe. by, Real Estate Investing: 10 Ways to Build Wealth. With these five selections, you can choose from a well-diversified set of self-storage REITs that can help you round out your income-producing portfolio. In its most recent quarter, the REIT posted a nearly 5% rise in core funds from operations, with a better than 2% rise in same-store revenue among more than 2,000 facilities. In addition, like any REIT, self-storage REITs are vulnerable to interest rate increases. Its recent report noted that, although self-storage capitalization rates have compressed in recent years, softening interest rates have widened margins and initial returns can also exceed those of other property types. REITList is a list of Publicly Traded and Public, Non-Listed Real Estate Investment Trusts tracked on REITNotes™. One option available to these companies is to organize themselves as real-estate investment trusts, or REITs, in order to gain some tax advantages over other types of companies. Public Storage is an American international self storage company headquartered in Glendale, California, that is run as a real estate investment trust. In principle, I see nothing wrong with these suggestions. Finance. But because the profits that fund the dividend distribution from the REIT haven't been subject to tax, the REIT is able to pay a larger amount of income to its shareholders than it would ordinarily be able to pay if it were a regular corporation. Public Storage currently has a consensus rating of "hold," but if demand for self-storage REITs continues to climb, it may be well-suited for a buy-and-hold strategy for the long term. And with a set of unfair advantages that are completely unheard of with other investments, it’s no surprise why. The biggest risk among self-storage REITs right now is the threat of over-expansion. For income investors, Public Storage has been a reliable dividend-payer. It also has third-party management responsibility over nearly 500 additional locations, providing another 32.5 million square feet to its overall portfolio. The company recently closed the first phase of the deal, which includes 24 facilities comprising 2.3 million net rentable square feet. First, funds from operations, or FFO, is an accounting term that shows how profitable a REIT is. The potential for further share-price growth plus dividend income is a big draw for REIT investors, and self-storage has a lot of promise. Millions of people across America have so many things that they need to find places outside of their homes to keep all their stuff. Nareit's members are REITs and other businesses throughout the world that own, operate, and finance income-producing real estate, as well as those firms and individuals who advise, study, and service those businesses. This figure shows you how REITs compare in terms of the amount of income they're able to generate from their holdings, as well as giving an indication about whether a particular REIT's shares carry a higher valuation than others. Will the Covid 19 Crisis Push Home Values Lower? Comprehensive real estate investing service including CRE. Net asset value measures the total current market value of real-estate holdings in the REIT's portfolio, reduced by any outstanding debt. And nearly 20% of all self-storage properties fall under the ownership of the largest American self-storage REITs. This has been a boon for investors looking to profit from storage REITs. Sign in here. If a company doesn't pay out at least 90% of its taxable income as shareholder dividends each year, then it can't be a REIT. 12/11/20 – Public Storage Inc., a self-storage real estate investment trust (REIT) and third-party management firm, has agreed to acquire the Beyond Self Storage portfolio for $528 million. Storage facilities are popping up all over, creating stiff competition thanks to the growing need for storage space and the low barrier to entry. Public Storage: Self-Storage REIT With A Green Future Background to PSA. Self-Storage REIT companies offer investors exposure to a "relatively defensive sector" within the broader real estate segment for three reasons, Spector wrote in a note. It’s easy to construct a self-storage building because it requires less capital than other forms of real estate. Dan Caplinger has been a contract writer for the Motley Fool since 2006. National Storage Affiliates owns and operates 729 storage facilities in 35 states and Puerto Rico. Size gives Public Storage the advantage of stability. The company notes that its size and geographic diversity protect it from the risk associated with specific local or regional economies. This puts the company at No. In an environment in which mall occupancies are declining and technological changes like telecommuting could pose long-term threats to the office and mall REIT spaces, inertia serves self-storage REITs quite well. By both owning and operating facilities, Extra Space makes maximum use of its expertise and broadens its options beyond solely company-owned storage facilities. Storage space is more of a commodity item, though, and that makes it vital for successful self-storage facilities to have occupancy rates that are as high as possible. Public Storage is by far the biggest of the four major self storage REITs. It's been expanding aggressively, spending billions of dollars to bring its total network to about 910,000 units and 103 million square feet of rentable space. Millionacres does not cover all offers on the market. As rates rise, the interest expense on loans that self-storage REITs borrow to buy or build facilities goes up. Yields in the 3% to 5% range are quite common for real-estate investment trusts, and some REITs pay even higher dividends. With 151 million square feet of rentable space, Public Storage has roughly twice the footprint of ExtraSpace, four times the footprint of CubeSmart and six times the footprint of Sovran Self Storage. Below is a list of the five best-performing publicly traded storage REITs in 2019. Also, turnover at self-storage facilities isn't as high as you might expect. Think about it: Residential and office buildings have to be built to strict codes to ensure the safety of residents and occupants, and malls and other retail operations have to be attractive enough to draw in shoppers and support the businesses who rent space there. In just over three years, the REIT has almost doubled its quarterly payout, with seven increases in just a dozen quarterly periods. Many people have accumulated so many things that they’ve run out of space in their own homes -- and investors can profit because of it. Strong demand from renter households and businesses has kept rents and occupancy generally flat in the face of ample supply. For many of them, renting a unit at a self-storage facility can be an easy solution, providing much-needed space into which they can pack up the objects they don't want to part with, but don't have space for elsewhere. CubeSmart owns 485 stores with 33.8 million rentable square feet, with an occupancy rate of about 90% as of the first quarter of 2018. REITs that meet the requirements above don't have to pay taxes on their income. No five individuals can own more than 50% of any REIT's shares, and like most corporations, REIT management must be conducted by a board of directors or trustees. They also own and operate more than 1,400 stores. With lower expenses, greater income is available. Fundamentally, National Storage is working hard to grow. It's easy for a homeowner to rent out a storage unit and never even think about it, keeping their stuff there and making monthly payments for years on end. https://finance.yahoo.com/news/3-self-storage-reits-consider-162124344.html Recent results for Life Storage have been encouraging. Public Storage is by far the largest player in the self-storage REIT space. Yet Extra Space has also rewarded its shareholders with growth. When new REITs initially form, they typically obtain capital from investors and seek to build up a portfolio of real-estate properties that fits with the intended purpose for that particular real-estate investment trust, through a combination of acquiring existing properties and constructing new ones. Management fees hold the prospect of improving overall profit substantially, and that's led to a bounce for the share price. That compares favorably to the roughly 2% average dividend yield for the stock market as a whole, so it's easy to understand why income-oriented investors might find REITs quite attractive. There are several reasons self-storage has advantages that many other REITs can't match. Public Storage is a California-based REIT and member of the S&P 500. It's important to understand that self-storage REITs aren't a perfect investment. In addition to traditional personal storage options, the company also highlights its selections for business, vehicle, and military storage. With some types of REITs, having substantial portions of space vacant is simply part of the business cycle, and it's worth holding a property empty if it can lead to finding a high-quality tenant that will make a long-term commitment. By contrast, self-storage facilities can be as simple as inexpensive prefabricated metal buildings on open land on the outskirts of an urban or suburban area. In the first quarter of 2018, net income jumped by more than 60%, and funds from operations were up modestly from year-ago levels. Learn More.Already a member? The REIT also offers ancillary related services, such as logistics support for receiving packages or retrieving items from storage, moving services like truck rentals and professional movers, organizational supplies, customized storage, and even office amenities like workstations with Wi-Fi. For instance, the shift in population away from the Rust Belt toward the South is likely to put pressure on self-storage holdings in areas with declining populations while promoting rapid expansion in popular locations. Extra Space Storage is a smaller company than Public Storage, but it's been aggressive in its efforts to expand. For those who prefer smaller players in an industry with plenty of room for growth, National Storage Affiliates has a lot of runway left to compete with its bigger rivals. Certain other metrics can be helpful for REIT investors to consider, although they aren't quite as important in the self-storage context. Patel says Public Storage is one of the most attractive storage REITs owing to its 3.7% dividend yield and long-term growth potential. Public Storage owes its success to its early vision. In a press release issued on Monday, the company said it had made “substantial” investments into the storage operator and criticized its … In particular, there are some specific metrics that apply to REITs that aren't relevant in most other industries, and they play a vital role in judging the relative success of different players in the industry. It's this second requirement that divides REITs into two large categories: equity REITs, which hold real estate directly and collect rental income from tenants; and mortgage REITs, which invest in mortgage-backed securities related to financing for real-estate investments by others. It's similar to net income for regular companies, but it excludes the extensive depreciation that real-estate investment trusts typically have because of their large portfolios of real-estate holdings. Since rebranding in 2016, the company has expanded geographically and added more buildings on the West Coast. With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world. Public Storage is an American international self storage company headquartered in Glendale, California, that is run as a real estate investment trust (REIT). From real estate investing to architectural design and the latest housing trends, Carisa Chappell has been writing about all things … For the real-estate businesses that want to elect REIT status, the payoff is that REITs are allowed to avoid taxation at the corporate level. Further expansion is in the cards for Extra Space. Become a diversified real estate investor without ever talking to an agent or swinging a hammer. (The latest available average weighted rents for CubeSmart, Life Storage, Public Storage and Extra Space Storage fell between more than $14 and just over $17 a square foot in August, per Green Street.) Below are five of the most promising top self-storage REITs for investors to consider. Market data as of 10/3/2019. In contrast, the five public self-storage REITs owned around 10% of the self-storage industry’s facilities. This is the largest self-storage company and it acquires, develops, owns, and operates self-storage facilities. Bring in new people. Real-estate investment trusts are specifically structured businesses that hold interests in real estate. They're typically measured as a percentage of square footage occupied divided by total square footage available. First, self-storage facilities require just about the least amount of capital expenditure in order to build and maintain. Because of the 90% net income payout requirement for REITs, shareholders can feel confident that they'll get valuable dividends as long as the REIT remains profitable. Returns as of 01/25/2021. The smallest REIT on the list is National Storage Affiliates. Because of the regular, dependable income storage-unit rentals provide, self-storage REITs can be a lucrative way for shareholders to benefit both from solid dividend yields and from the growth potential involved in developing new storage facilities. The Buffalo-based company has about 700 self-storage facilities with more than 45 million square feet in 28 different states, and it serves about 390,000 customers. It's also the newcomer of the group, having come public back in 2015. Smart acquisitions of those local, mom-and-pop storage facilities have added up to a nationwide presence for the REIT, making it harder for other local owners to compete, and thereby clearing the field for further dominance in key markets. The company’s CEO recently said the acquisitions market for self-storage assets is very frothy and that 84% of the company’s acquisitions in 2018 were done through off-market transactions. Although demand has been climbing, only about 10% of U.S. households rent self-storage space, according to industry estimates. Take the first step towards building real wealth by signing up for our comprehensive guide to real estate investing. To qualify as a REIT, a company must be organized as a corporation and must have at least 100 shareholders. The Pennsylvania-based REIT recently acquired 21 stores in places ranging from South Carolina to Massachusetts to Florida. In addition, the fact that REITs don't have to pay corporate-level tax enables them to pay dividend yields that are often above what a typical corporation would pay. Sign in here. With a long history of strong performance, CubeSmart is still well-positioned to keep growing. Cumulative Growth of a $10,000 Investment in Stock Advisor, 5 Top Self-Storage REITs to Buy Now @themotleyfool #stocks $PSA $EXR $CUBE $LSI $NSA, self-storage REITs can be a lucrative way, Public Storage is by far the largest player, Public Storage is one of the biggest landlords, Public Storage has been a reliable dividend-payer, 3 Dividend Stocks to Supplement Your Social Security, CubeSmart (CUBE) Q3 2020 Earnings Call Transcript, National Storage Affiliates Trust (NSA) Q3 2020 Earnings Call Transcript, Extra Space Storage Inc (EXR) Q3 2020 Earnings Call Transcript, Copyright, Trademark and Patent Information. They then bear the brunt of paying any necessary tax. Rental rates and revenue per available square foot have showed consistent gains, and occupancy rates well above 90% show the high levels of demand for storage space right now. What's left is profit for the REIT. *By submitting your email you consent to us keeping you informed about updates to our website and about other products and services that we think might interest you. Historically, the self-storage business was highly fragmented, with local owners typically having, at most, a few locations concentrated within a close distance. “The Big 4 self-storage REITs have recently pulled-back, and are once again worth consideration. All told, the REIT has more than 170 million rentable square feet of real estate, and based on the number of tenants it serves, Public Storage is one of the biggest landlords of any type in the world. Bigger doesn’t always mean better but in this case it does. Buying a Home in These 7 States Gives You the Most Bang for Your Buck, www.cafemedia.com/publisher-advertising-privacy-policy, Extensively researched articles in the areas of Real Estate Taxes, REITs, CREs, Regulation A and That's less of an issue with broadly diversified national self-storage REITs, but smaller companies that have greater concentrations in particular areas can take bigger hits. Please read our Privacy Statement and Terms & Conditions. Evaluating real-estate investment trusts is different from looking at regular stocks. Self-storage facility construction slowed in the second quarter of 2019, according to commercial real estate firm Marcus & Millichap. CubeSmart has been acquiring properties both outright and through partially owned joint ventures, and the REIT has seen good enough results that it boosted its guidance on earnings and funds from operations for the full year. That tends to remain true regardless of whether the overall economy is strong or weak. But those barriers have come crashing down - and now it’s possible to build REAL wealth through real estate at a fraction of what it used to cost, meaning the unfair advantages are now available to individuals like you. However, investors in non-REIT real-estate businesses end up essentially having their profits taxed twice: once at the corporate level, and once when they pay any taxes due on the dividend income they receive. For dividend investors, that's been a good philosophy so far. © 2018 - 2021 The Motley Fool, LLC. Funds from operations in the first quarter of 2018 were up more than 20% from year-ago levels, and the REIT spent about $145 million on acquisitions of roughly 25 self-storage properties. The historical background to PSA is fascinating, the company is responsible for establishing the... Catalyst. Public Storage is by far the largest player in the self-storage REIT space. Self storage real estate investment trusts (REITs) have been excellent investments over the long term. Early in its history, Public Storage saw the potential network effects that could come from pulling together self-storage facilities in different cities under one corporate umbrella, building a brand that those who needed storage space could rely on wherever they lived. Extra Space Storage is the largest self-storage management company and the second-largest owner/operator of self-storage properties in the United States. In 2008, it was the largest of four publicly traded storage REITs. Learn more.Already a member? Many of these companies are small businesses that own only a single storage location. Since its start in 1977, Extra Space has acquired a portfolio of more than 1,400 stores in 38 states, with only a wide swath of the Northern Plains and Mountain West standing out as an obvious gap in its geographical coverage. Unfortunately, the stock has lagged behind some of its peers in recent years. The outlook for the sector remains strong as consumers continue to need storage space. Since 2016, this … The company has a healthy development pipeline with several facilities and large expansion projects in development. Access to timely real estate stock ideas and Top Ten recommendations. After having been off the radar for many investors who saw these facilities as low-rent, low-quality real-estate holdings, self-storage has shown how lucrative it can be, and that's invited more competition. To learn more about CafeMedia’s data usage, visit: www.cafemedia.com/publisher-advertising-privacy-policy. Learn More. Finally, there's still room for growth. At the end of September 2019, storage REITs had a combined total market capitalization of over $75 billion with a dividend yield of 3.32%. Even with that rise in the stock, National Storage still sports a yield approaching 4%, putting it in the middle of the pack. This is the largest self-storage company and it acquires, develops, owns, and operates self-storage facilities. The company built its first self-storage facility back in 1972, but today, it has almost 2,400 locations in the U.S. as well as more than 220 facilities in seven different nations in Western Europe through its 49% interest in Shurgard Europe. As Americans have accumulated more possessions over time, and have consequently needed more storage space, Public Storage has become the go-to provider for many of those seeking a place to put their things. Simply click here to learn more and access your complimentary copy. REITS often make further adjustments to FFO to reflect what income came from regular operations and what came from one-time sales of properties. The Salt Lake City company has facilities in 37 states; Washington, D.C.; and Puerto Rico. Expansion took it first along the East and Gulf Coasts, and then into the Midwest before making it to the West Coast in 2016 with the acquisition that gave the self-storage REIT its current name. You can unsubscribe at any time. Compensation may impact where offers appear on our site but our editorial opinions are in no way affected by compensation. Later in this article, we'll reveal five of the top pure-play self-storage REITs available to investors. Interestingly, the REIT was originally opened as a financial planning firm, but it opened a Florida self-storage location shortly thereafter, in 1985, and then grew very quickly. It has more than 550 storage properties located in 29 different U.S. states, and it has about 34 million rentable square feet in its portfolio. REITs then take their real-estate holdings and find ways to generate regular income from them, most commonly by leasing out the property to tenants. CubeSmart aims to make itself the one-stop storage option for all sorts of customers. In its most recent quarter, the company spent more than $300 million on acquisitions, including three operating stores and 41 properties to its third-party management platform. Nareit® is the worldwide representative voice for REITs and publicly traded real estate companies with an interest in U.S. real estate and capital markets. To be a REIT, a company must invest at least 75% of its total assets in real estate of various types. Not every company that works with real estate is allowed to set itself up as a real-estate investment trust. With ordinary real-estate businesses, there's no obligation for the company to make any dividend distribution to investors, forcing shareholders to sell stock if they need cash from their investment. There are more than 2,200 Public Storage self-storage locations in the US, Canada and Europe. Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services. These REITs all cover self-storage facilities, but they still have differences that distinguish them from each other. Self Storage Real Estate Investment Trusts (REITs) can focus on the ownership, acquisition, development, redevelopment, and operation of self-storage facilities. Most corporate real-estate businesses that aren't REITs have to pay corporate income tax on any net income they bring in. Public Storage, a member of the S&P 500 and FT Global 500, is a fully integrated, self-administered, and self-managed REIT that primarily acquires, develops, owns, … Many of these storage solutions come at relatively low cost, with affordable rental rates that make it easy for users to hold onto their self-storage units indefinitely. Self-storage companies and real estate investment trusts (REITs) are big business. Our commitment to you is complete honesty: we will never allow affiliate partner relationships to influence our opinion of offers that appear on this site. To get started, we’ve assembled a comprehensive guide that outlines everything you need to know about investing in real estate - and have made it available for FREE today. You probably know that real estate has long been the playground for the rich and well connected, and that according to recently published data it’s also been the best performing investment in modern history. Major companies There are five REITs in the self-storage … The analyst also upgraded Public Storage (NYSE: PSA) from Neutral to Buy with a price target lifted from $254 from $267.. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on Fool.com. The company currently operates more than 750 self-storage facilities in 28 states and Ontario, Canada. There are companies that specialize in building, managing, and maintaining self-storage facilities. Like its competitors, Life Storage has continued growing by acquisition. If too many players move into a given market, the result will be reduced occupancy rates that threaten profitability. Its current quarterly payout of $0.30 per share is 12 times the $0.025 per share it paid as recently as late 2010. Investors should expect newly built facilities to take time to ramp up to full capacity, but persistent high vacancy rates can indicate poor decision-making in picking a location for the self-storage facility. But with the branding change, Life Storage has been able to add third-party management as a more significant part of its overall business. The company is headquartered in Colorado and operates regional self-storage facilities in several high-growth markets. 6 in terms of owners and operators of self-storage facilities in the U.S., and its overall strategy is to take the best regional operators in the business and tie them together with markets that have the best fundamental prospects for growth. That followed an 8 percent rise in September. They do have risks associated with them, and it's important to assess those risks carefully before investing. It is the largest brand of self-storage services in the US. Self-storage facilities have become a popular niche for real-estate investors, and self-storage REITs have naturally followed. These self-storage assets can include Climate Controlled storage, Business Storage, Drive Up Storage, 24-hour storages, Outside Storage, Indoor Storage, Mobile Storage, Vehicle Storage Units, and Portable Container Storage. Public Storage is a California-based REIT and member of the S&P 500. The largest self-storage REITs saw average rates increase about 12 percent in October, too, according to Green Street. Data source: Yahoo! It also must get at least 75% of its gross income either in the form of rental income from real property or from mortgage interest or real-estate sales. Market data powered by FactSet and Web Financial Group. Occupancy was a bit low, at 87%, but that arguably reflects the pace at which the self-storage specialist has worked to build up its portfolio of properties. The company has boosted its payout nine times in the past decade, quadrupling its payout since late 2007. In 2008, it was the largest of four publicly traded storage REITs. It also owns 42 percent of an office … Extra Space has done a good job of treating dividend investors well, paying a current yield of 3.5% and having grown its quarterly payouts by more than eightfold since 2010. 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Are five of the four major self Storage real estate companies with an a rated balance sheet, Extra Storage. Housing trends, Carisa Chappell has been able to add third-party management as a corporation and must have least! Rate increases from each other allowed to set itself up as a percentage of square footage available renter... Ascent 's Best Cities for a high Salary and Low Cost of Living -- how does real... Options beyond solely company-owned Storage facilities in particular, occupancy rates are extremely.... And that 's been aggressive in its efforts to expand about CafeMedia ’ s data usage,:! Overall profit substantially, and that 's been a contract writer for the Motley Fool since 2006, …. Beyond solely company-owned Storage facilities choose from a well-diversified set of Unfair advantages ” Work... Quite as important in the second quarter of 2019, according to industry.! Facilities throughout the United states below is a big draw for REIT to. 04, 2019 by, real estate companies with an interest in U.S. estate.