TMFDoraemon (93.49)

U Store It, Someplace Else

February 22, 2007 – Comments (0)

This is bound to prove interesting as more facts come out. U-Store-It Trust (NYSE: YSI), one of the few REITs with a valuation that is interesting, has just tossed its Chairman, another board member, and a president at a subsidiary out on their rear ends. These three folks are the founders of the company that preceded U-Store-It Trust and they all have the same last name: Amsdell.

What the Amsdell's did is not exactly clear, but the company did update its guidance to account for charges related to a legal settlement on actions taken by the predecessor company and there are some other interesting details in the company's 8-k filing. Whatever is ultimately determined to have happened, the company believes that Robert J. Amsdell and Todd C. Amsdell, Chairman and subsidiary president respectively, did not act in the best interest of the company or shareholders in certain transactions. In response the company terminated Todd Amsdell, asked for and now received the resignation of Robert Amsdell, and Barry Amsdell appears to have followed.

Ultimately I view the ouster of the Amsdell's as a positive for U-Store-It. Immediately after going public U-Store-It expanded too quickly and many of the properties the company acquired were directly from the Amsdell family. Such transactions can be legit and the company also has a stake in properties owned by its new CEO, Dean Jernigan. But the size and scope of the agreement with Jernigan is smaller. In contrast the agreement with the Amsdell family includes not only the purchase of properties, but management fees and construction agreements. This leaves ll kinds of places for money to leak out from U-Store-It and into the Amsdell family checkbook. Whether or not that happened will require waiting for the results of the inquiry. But whatever happened was bad enough that the Amsdell's decided to step aside to save face for both the company, and I believe, them.

The hiring of Jernigan as CEO less than a year ago gave the company some credibility, because of his prior experience in the industry before selling his business to General Electric (NYSE: GE). Jernigan's subsequent effort to build out his management team and fill in important operational roles was another step forward that gave U-Store-It additional credibility. An improvement in results hasn't been seen yet, but comparing the operational steps taken and communication with shareholders from the current management team against what the original management the Amsdell's brought to the table provided is not much of a contest.

Given that the Amsdell's own approximately 20% of the company's outstanding shares their involvement won't completely go away and they'll still have some say in how the company is run. But overall I think the company will be more focused and better able to compete with Public Storage (NYSE: PSA), Sovran Self Storage (NYSE: SSS), Extra Space Storage (NYSE: EXR), and all the mom and pop local storage operators with the new management team and an independent board.