hey4ndr3w (96.80)

Can self-storage companies benefit from subprime misery?

May 16, 2008 – Comments (3) | RELATED TICKERS: SSS , PSA , UHAL

I read a sad piece in this past Sunday's New York Times describing how folks who lost their homes in foreclosure are now losing the stored contents of those homes at self-storage facilities. It turns out that many of them are no better able to afford the monthly rent on their storage units than they are the mortgage. To recoup some of their loss of revenue, the storage companies auction the contents of the units, sometimes selling the entire contents of households for under $10.

The question in my mind is whether this is a real counter-trend: are the self storage companies going to have to write down much of their aging A/R against revenue as cash rents fails to appear, month after month? Or is this a mere anecdote, another heart-wringing example of how the credit mess has stomped on the dreams of plain folk?

My answer to the question posed in the title is, they already have, but that benefit will end shortly. I think we've seen small run-ups in the price of shares in these firms beyond what their fundamentals can support. I would characterize the pop in price as speculative, peaking sometime this past March. I think that, going forward, we can expect prices to return to something more closely resembling fair value.

I'm not sure that this means there's another real trend of storage renter defaults. However, I am disenheartened by the crisis and our policymakers' response to it, and I am quite sure I do not want to know. I can hardly bear to look.

Red Thumbs: EXR, PSA,  SSS, UHAL, YSI

Play tight, everyone.

Andrew