Mediaboss Marketing

By Hui-yong Yu - Wed May 02 04:00:01 GMT 2012

Scott Muthersbaugh/Burlington Times-News/AP Photo

Buyers look into a storage unit up for auction at Ray's Self Storage facility in Burlington, North Carolina.

A Public Storage rental office is seen in the Bronx borough of New York, U.S.

A Public Storage rental office is seen in the Bronx borough of New York, U.S. Photographer: Andrew Harrer/Bloomberg

The best real estate investment in the past decade was found at the opposite end from trophy resorts and office towers, in 5-foot-by-5-foot lockers.

Self-storage companies, which rent units to small businesses and consumers under names such as Uncle Bobs Self Storage (SSS), produced the best risk-adjusted return among 10 U.S. real estate investment trust indexes in the past decade, according to the BLOOMBERG RISKLESS RETURN RANKING. They had the highest total return and the third-lowest volatility, for a risk-adjusted gain of 10.6 percent. Owners of offices, hotels and warehouses fared among the worst, hurt by price swings.

Public Storage, CubeSmart, Extra Space Storage Inc. (EXR) and Sovran Self Storage Inc. attracted investors with low debt ratios and steady cash-flow growth in a decade that saw commercial-property values soar to records along with sales of mortgage-backed bonds to finance a wave of takeovers. The debt- to-assets ratio for Public Storage, the largest in the group, is 22.5 percent, half the average 45 percent for REITs, said Michael Knott, managing director of real estate research firm Green Street Advisors Inc., making the stock less susceptible to large price swings if the economy worsens.

Public Storage (PSA) has incredibly low leverage compared to the average REIT, Knott, whose firm is based in Newport Beach, California, said in an interview. Its typically not as volatile.

The Bloomberg REIT Public/Self-Storage Index (BBREPBST) topped gauges tracking healthcare REITs and regional mall REITs, which returned a risk-adjusted 8.4 percent and 7.5 percent, respectively, in the 10 years through April. Warehouse REITs (BBREINDW), which had the highest volatility and the lowest total return during the period, joined hotels at the bottom, with a risk- adjusted gain of 0.8 percent.

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Best U.S. Real Estate With Self-Storage: Riskless Return