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Life Storage Disposes 32 Properties to Inland Affiliate

Zacks Equity Research

Life Storage, Inc. LSI recently announced that it has completed the disposition of 32 self-storage properties for an undisclosed amount. The properties were sold to Inland Real Estate Acquisitions, LLC — a purchasing entity for The Inland Real Estate Group of Companies, Inc.

These properties are situated in Louisiana, Mississippi, Texas, South Carolina and North Carolina. Although the company has sold the properties, a long-term management agreement will allow it to continue managing these facilities.

Per management, the transaction has enabled Life Storage to shed these mature properties, while at the same time strengthen its relationship with Inland, as the latter continues expansion of the self-storage portfolio.

Management of Inland Real Estate Acquisitions, LLC views this alliance between the companies as a strategic move. Further, management believes Life Storage’s 35 years of expertise in in-place acquisitions and property management will aid Inland to deliver top-class services by owning and operating self-storage properties.

In fact, Life Storage is a leading national owner and operator of self-storage properties, with more than 775 stores across 28 states and Ontario, Canada. It also manages 217 properties for third-party entities.

Notably, the self-storage asset category is basically need-based and recession-resilient in nature. This asset class has low capital expenditure requirements and generates high operating margins. Additionally, the self-storage industry will likely continue witnessing solid demand, backed by favorable demographic changes, and events like marriages, shifting, death and even divorce.

Furthermore, the industry is characterized by fragmented ownership and only around 20% of the total self-storage square footage is under REITs’ ownership. Amid this solid scope for consolidation, Life Storage has expanded its footprint in recent years, with a particular focus on primary markets as well as secondary markets. This will enable the company to enjoy higher scale, drive margin expansion and revenue growth.

However, due to higher development activities, supply of self-storage properties will likely be elevated in the ongoing year. This high supply is likely to fuel competition for the company, curb its power to raise rents and turn on more discounting.

Shares of this Zacks Rank #3 (Hold) company have gained 4.3% compared with the industry’s rally of 3.6% over the past three months.


Key Picks

Investors can consider better-ranked stocks from the same space like Public Storage PSA, Lamar Advertising Company LAMR and PS Business Parks, Inc. PSB, each carrying a Zacks Rank of 2 (Buy), currently. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Public Storage’s funds from operations (FFO) per share estimates for 2019 moved marginally north to $10.74 over the past week.

Lamar Advertising’s FFO per share estimates for the ongoing year have been revised slightly upward to $5.83 over the past 60 days.

PS Business Parks’ current-year FFO per share estimates moved up marginally to $6.71 in the past month.

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