From the Early Note this Morning: New Best Idea Long Life Storage (LSI) delivered another self-storage beat-and-raise last night with Core FFO of $1.37/share which was +$0.08/share (+6%) vs. Hedgeye and +$0.09/share (+7.2%) vs. Consensus, and took up the FY21 ranges. The one item that stuck out the most to us is that it looks like LSI had the most aggressive portfolio churn in 3Q21 among EXR/PSA/LSI with ending SS occupancy down -110bp q/q to 94.6% vs. -80bp for PSA and -30bp for EXR, and we wonder if that is a function of LSI hitting the gas pedal the hardest on rate growth heading into year-end. LSI had long been viewed as the "also ran" in the group going back to its YSI days, but the reality is that it has dramatically improved its portfolio quality and operations, yet in-place rents of ~$16.57psf remain significantly discounted to peers at a point in the cycle where market rental rate growth continues to accelerate. By extension this means LSI may also be the fastest pure self-storage horse alongside Best Idea Long CUBE heading into FY22. It has taken us a little while to get comfortable with LSI, but we are adding it to our Best Idea Long list and moving PSA to the Long Bench. We have had a nice run with PSA and still think it can be owned here, but see more upside elsewhere in the subsector as 3Q21 results have come in, alongside better Quad 2 style factors as well (specifically leverage and size). We believe FY22 consensus Core FFO for LSI is far too low and should have a $6-handle in front of it vs. ~$5.50/share currently. We are effectively overweight self-storage with UHAL/CUBE/LSI all on the Best Idea Long list and PSA/EXR on the Long Bench (see Figure 1 below).
Figure 1: Updated Hedgeye REITs Position Monitor
Figure 2: REIT 3Q21 Earnings Surprise Monitor
Prior Notes:
11.2.21 - REITS DAILY BRIEF | 11.2.21 | (PSA, U.S. OFFICE UTILIZATION)
11.1.21 - REIT RECAP | 11.1.21 | PSA 3Q21 RESULTS
10.31.21 - SUNDAY NIGHT REIT READ | 10.31.21 | (3Q21 EARNINGS SURPRISES, POSITION MONITOR)
10.28.21 - REIT RECAP | 10.28.21 | CPT 3Q21 RESULTS
10.28.21 - REITS DAILY BRIEF | 10.28.21 | (EXR)
10.28.21 - REIT RECAP | 10/28/21 | INVH 3Q21 RESULTS
10.28.21 - REIT RECAP | 10/27/21 | AVB 3Q21 RESULTS
10.27.21 - REITS DAILY BRIEF | 10.27.21 | (3Q21 Earnings, AVB, EXR, Office)
10.26.21 - REIT RECAP | 10/26/21 | EXR 3Q21 RESULTS
10.26.21 - REITS DAILY BRIEF | 10.26.21 | (EQR, REXR)
10.25.21 - SUNDAY NIGHT REIT READ | 10.24.21 | (POSITION MONITOR)
10.21.21. - REIT RECAP | 10/21/21 | REXR 3Q21 RESULTS
10.20.21 - REITS DAILY BRIEF | 10.20.21 | (EGP, PLYM, REXR, ILPT)
10.19.21 - VIDEO | American Homes 4 Rent (AMH) Thesis
10.19.21 - REITS DAILY BRIEF | 10.19.21 | (COLD, SLG, VNO, AMH, U.S. Office Utilization)
10.18.21 - REITS DAILY BRIEF | 10.18.21 | (PLD)
10.17.21 - SUNDAY NIGHT REIT READ | 10.17.21 | (PLD, POSITION MONITOR)
10.15.21 - REIT RECAP | 10/15/21 | PLD 3Q21 RESULTS
10.13.21 - REITS DAILY BRIEF | 10.13.21 | (PLD)
10.10.21 - SUNDAY NIGHT REIT READ | 10.10.21 | (POSITION MONITOR UPDATE)
10.8.21 - BLACK BOOK ROUND-UP | AMERCO (UHAL)
10.7.21 - BEST IDEA ROUND-UP | AMERICOLD REALTY TRUST (COLD)
Please e-mail with any questions.
Rob Simone, CFA
Managing Director
Twitter: @HedgeyeREITs
