Self storage has been among the real estate sectors that has benefitted from the pandemic, as new demand generators emerged, including remote work and schooling, which caused people to clear out space in their living quarters to set up home offices and makeshift classrooms. This has led to accelerated move-in activity at self-storage facilities and drove occupancies to all-time highs, with an average above 92 percent in 2021. These trends also demonstrated the sector’s strength as a resilient investment opportunity.
However, the recent increase in demand for self-storage facilities has shifted to smaller, lower cost cities along with population growth in secondary and tertiary markets. Those markets might have limited inventory, and in the Northeast and Mid-Atlantic might also come with high barriers to self-storage development.
Global Self Storage (GSS), a publicly-traded REIT which focuses on acquisition, development and redevelopment of self-storage facilities in secondary and tertiary markets, for example, completed three new expansion/conversion projects last year. These included an 11,800-sq.-ft expansion in Millbrook, N.Y.; a 13,713-sq.-ft. conversion in Fishers, Ind.; and a 7,300-sq.-ft. expansion in West Henrietta, N.Y.
Overall, the REIT experienced a nearly 8 percent increase in same-property net operating income (NOI) in 2020, compared to about 4 percent the previous year. GSS' portfolio, which now includes 13 facilities with 6,972 units and nearly 1 million sq. ft. of leasable space, also saw its overall occupancy climb to more than 94 percent in the fourth quarter. Its stock price at the close of day on Tuesday, at $4.99 per share, was on the high end of the REIT’s 52-week range of $3.50 to $5.15.
For an in-depth look at growing investment opportunities in the self-storage sector, WMRE caught up with GSS CEO Mark Winmill to discuss the REIT’s growth, investment strategy, capital campaigns, investor outreach and expectations going forward.
This interview has been edited for style, length and clarity.
WMRE: Who are Global Self Storage REIT’s major investors?
Mark Winmill: The largest investor is comprised of GSS’ management team and company affiliates, which hold 8.5 percent of the company’s outstanding shares. GSS’s second largest investor is Bard Associates Inc., which holds its shares through hundreds of retail brokerage accounts. GSS has approximately 3,800 stockholders, the vast majority of which are retail stockholders. In the current era, the search for yield has attracted many retail investors to our stock.
WMRE: What are the trends among retail investors in your REIT's stock and self storage REIT stocks in general?
Mark Winmill: Retail investing in GSS remains strong. The self-storage industry has once again demonstrated its resiliency despite the pandemic, and GSS has persevered through those challenges. It has provided a consistent dividend since its inception, with an attractive yield that is currently over 5 percent. We believe retail investors, especially in today’s low interest environment, will continue to seek out self storage REIT stocks such as ours with an attractive yield.
WMRE: Have your investor relations strategies evolved during the pandemic? How do you go about marketing your REIT to potential investors right now? Is your company trying to get in front of wealth advisors/financial advisors to raise interest in GSS?
Mark Winmill: Yes, the pandemic has changed our approach to investor relations. We have been participating in investor conferences and non-deal road shows with a virtual format instead of in-person. Investors have been receptive to this virtual format, and it has allowed us to reach a greater number of investors and wealth advisors and helped to raise awareness of our company within the investor community.
WMRE: Has GSS done any equity or debt offerings recently or is it considering them, given current valuations?
Mark Winmill: The company’s last capital raise, which was completed in December of 2019, raised $6.8 million of equity. Although we cannot provide details on when we may launch a new debt/equity capital raise, our board of directors regularly reviews topics such as capital formation, debt versus equity ratios, use of capital and debt, and market conditions to complete a successful capital campaign.
WMRE: What are GSS' plans for acquisitions and developments in the next few years?
Mark Winmill: GSS is continuously evaluating off-market and marketed self-storage properties for sale. We will continue to focus on secondary and tertiary cities in the Midwest, Northeast and Mid-Atlantic regions of the country, where there is relatively less self-storage space per capita available, which translates [into] greater demand for available self-storage square footage. These markets also tend to have high barriers to entry for new self-storage development, as permitting through the local planning and zoning boards is typically more difficult to secure, so new supply by competitors is generally less prevalent.
Our strategic business plan includes funding acquisitions, either directly or through joint ventures; expansion projects at our existing properties; and broadening our revenue base and pipeline of potential acquisitions through developing Global MaxManagement, our third-party management platform.
WMRE: Are there certain markets that that offer most favorable opportunities for self storage right now?
Mark Winmill: We currently prefer secondary and tertiary markets with a geographic focus in the Midwest, Northeast, Mid-Atlantic and Southcentral areas of the country.
WMRE: When GSS is going in to bid on new acquisitions, on average how many bidders are competing for assets, and who are your most serious competitors—other REITs, private equity, etc.?
Mark Winmill: For off-market deals, we may be the only bidder. But for marketed transactions, we may be one of several bidders, which may include both private and public investors.