Printer Friendly

Robertson Stephens initiates coverage of three self-storage REITs; reaffirms Storage Equities buy recommendation.

SAN FRANCISCO--(BUSINESS WIRE)--Feb. 10, 1995--Robertson Stephens & Co. Friday initiated coverage of three self-storage real estate investment trusts (REITs), including Storage USA (NYSE:SUS) receiving a "Buy" rating, and Shurgard Storage Centers (NASDAQ:SHUR) and Storage Trust (NYSE:SEA) receiving "Market Performer" ratings.

The firm also reaffirmed its "Buy" rating on Storage Equities Inc. (NYSE:SEQ).

The coverage of these four companies makes Robertson Stephens the only major investment banking firm providing research coverage of all publicly traded companies in this niche sector of the REIT universe.

Jay Paul Leupp, real estate analyst and vice president of San Francisco-based Robertson Stephens, sees compelling opportunities in the self-storage segment of the REIT market, most notably growth prospects through consolidation.

"Each of these four self-storage REITs ranks among the nation's top 10 operators," Leupp said. "As we see many of the mom-and-pop storage facility owners, which basically characterize the industry, entering their late 50s and early 60s, we predict the larger operators will begin acquiring these small companies.

"The industry is currently highly fragmented, with many of these entrepreneurial businesses highly leveraged. As interest rates continue to rise, we expect to see these smaller firms scrambling to sell their facilities to the larger REITs," he added.

This segment's superior investment fundamentals attracted Leupp's attention last fall, and supply and demand imbalances have heightened his enthusiasm. There has been no measurable construction in the last four years, vacancy rates have dropped, rents are rising and limited capital has been made available for new construction.

Current rent levels among self-storage facilities are comparable to apartments on a square footage basis, which coupled with lower operating and constructions costs, offer property owners significantly better returns.

Storage USA, based in Columbia, Md., rated a "Buy," is considered the premier growth stock in the self-storage REIT sector and is the second-fastest-growing REIT in terms of funds from operations (FFO) growth. According to Leupp, notable characteristics expected to sustain Storage USA's continued high growth/high return profile include the company's seasoned management team, an aggressive growth strategy, strong balance sheet and operating structure.

Leupp's 12-month target price for Storage USA is $33.50 per share, up from its initial public offering price in March 1994 of $21.75 per share. The stock price has risen 29.89 percent, closing at $28.25 on Feb. 9, 1995. The 12-month target price is 14 times the 1995 FFO estimate, trading today at approximately 11.7 times 1995 FFO estimates.

Price appreciation combined with a current dividend yield of 6.6 percent, offer investors a 12-month total return of 27 percent.

Seattle-based Shurgard Storage Centers, rated by Leupp as a "Market Performer," has positioned itself as the high-quality operator in the self-storage industry. The Dec. 20, 1994, announcement of the company's intention to become self-advised was well received by the investment community, and the common stock has risen 24 percent since that date.

The stock closed Thursday at $23, trading at 11.1 times 1994 FFO estimates and 10.3 times 1995 FFO estimates. Leupp estimates Shugard's FFO to grow 8-10 percent annually through 1996, making today's stock valuation fairly valued.

Storage Trust Realty, located in Columbia, Mo., also rated by Leupp as a "Market Performer," ranks sixth-largest among self-storage operators based on net rentable square footage and achieves operating margins of 71.6 percent at the property level, making it the highest among the self-storage REITs.

Leupp believes Storage Trust has the potential to become one of the fastest-growing REITs in terms of FFO growth, depending on how rapidly management acquires facilities.

Leupp projects 1994 FFO for Storage Trust at $1.72 per share and 1995 and 1996 fully diluted FFO per share at $1.95 and $2.24, representing 13.37 percent and 14.87 percent growth, respectively. The stock closed Thursday at $19.125 with the 12-month price target at $19.50 per share, or 10 times the 1995 FFO estimate of $1.95 per share.

Glendale, Calif.-based Storage Equities, which Leupp has updated with another "Buy" rating, is considered the largest, most experienced operator in the industry and is poised to take advantage of the industry's improving fundamentals and consolidation. The company's "Public Storage" brand name is the most recognizable trademark to consumers.

Closing at $14.25 on Feb. 9, Leupp's 12-month target price is $19.25 per share. Price appreciation, combined with a current dividend yield of 6.4 percent, offers investors a potential 12-month total return of approximately 40 percent. Leupp predicts FFO to grow 12-15 percent annually through 1996, earning an FFO multiple expansion from 9.2 times to 11 times annual FFO estimates.

Robertson Stephens Real Estate Group initiated industry coverage in August of last year. The firm also has created two private real estate investment funds totaling $90 million since 1993. The group also expects to commence real estate investment banking, focusing on raising public capital for real estate investment trusts, real estate operating companies and homebuilders.

Robertson, Stephens & Co. (RS&Co.) is an investment management and investment banking firm specializing in emerging growth industries such as technology, health care, environmental, consumer/retailing, education/training industries, and real estate.

The firm's investment management businesses include mutual funds, venture capital, leveraged buyouts and focused limited partnerships, with approximately $1.5 billion under management. RS&Co. has headquarters in San Francisco, with offices in New York, Boston and Tokyo.

CONTACT: Robertson Stephens & Co., San Francisco

Shari Annes, 415/781-9700


Pondel Parsons & Wilkinson, Los Angeles

Craig Parsons/Lisa Prukop, 310/207-9300
COPYRIGHT 1995 Business Wire
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1995, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

Article Details
Printer friendly Cite/link Email Feedback
Publication:Business Wire
Date:Feb 10, 1995
Previous Article:PSI Acquires The Pipeline On-Line Internet Company of NY.

Related Articles
ShareData Adds BancAmerica Robertson Stephens to Strategic Alliance Program; Partnership Means More Services for Mutual Clients.
BancBoston Robertson Stephens Initiates Coverage of HOTJ with a Buy Rating.
BancBoston Robertson Stephens Initiates Coverage of QSFT with a Buy Rating.
BancBoston Robertson Stephens Initiates Coverage of DRRA a Buy Rating.
Robertson Stephens Initiates Coverage of EXAR with a Buy Rating.
Robertson Stephens Initiates Coverage of CHRD with a Buy Rating.
Robertson Stephens Initiates Coverage of ISIL with a Buy Rating.
Strengthen Your Association's Market Position.
Buchanan Storage Capital Becomes Exclusive Self Storage Association Partner in Self Storage Finance and Advisory Services Arena.
Chateau Products, Provider of Locks and Accessories, Becomes Self Storage Association Partner.

Terms of use | Privacy policy | Copyright © 2018 Farlex, Inc. | Feedback | For webmasters