Self-Storage REITs Might Be The Way To Play, Says BofA

Self-storage REITs reported sector-leading SS NOI growth in the second quarter of the year, even above already high expectations.

With peak occupancies across the industry driving greater pricing power, Bank of America Merrill Lynch analysts Jana Galan, Jeffrey Spector and Camille Tan reiterated their Buy ratings while boosting their price targets on Extra Space Storage, Inc. (NYSE: EXR), Public Storage (NYSE: PSA), CubeSmart (NYSE: CUBE) and Sovran Self Storage Inc (NYSE: SSS).

The positive view is also encouraged by strong overall fundamentals, prospects for accretive acquisitions and further market share gains, and “increased demand from an improving economy. In addition, technology/platform advantages allow for better revenue management."

Related Link: Baird Bullishly Initiates Self-Storage REITs

According to the note, risks include mounting price competition, move-outs, Internet advertising costs, and supply growth (surging faster than expected).

Having said this, however, Extra Space Storage is on Spector’s Top Picks list.

The price targets assigned to each stock are:

• Extra Space Storage: $85.00, up from $82.00
• Public Storage: $231.00, up from $228.00
• CubeSmart: $30.00, up from $29.00
• Sovran Self Storage: $108.00, up from $106.00

All of these price objectives imply an upside potential of at least 6 percent from current stock prices.

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