Public Storage is selling more property left behind in storage units by delinquent customers than it was a year ago, in a sign that Americans are facing more economic stress, the company's CEO said.
In webcast remarks from NAREIT's REITWeek conference, Chairman and CEO Ronald Havner Jr. said the absolute volume of customer goods sold is up roughly 5% to 8% year over year. The sales typically take place at the end of a 60- to 90-day foreclosure process, Havner said.
In general, Havner said observers of the self-storage sector are focusing too much on the dangers that existing property owners face from new construction of competing facilities.
"It's certainly a headwind, but there's other things going on in the marketplace," he said. "There's markets where there's virtually no new supply, and yet those markets are experiencing slower year-over-year rates of growth."
As he did in the company's first-quarter earnings call, Havner cited levels of consumer leverage, stemming from credit cards, auto loans and student debt, that he said have risen dramatically in the last four years. He also said credit card charge-offs — declarations from consumers that debts are unlikely to be collected — have risen, and he noted that some consumer goods companies have reported declining organic growth.
"We haven't identified any one particular thing," he said. "We're just trying to say, 'Hey, overall, there's some headwinds there for the average consumer in America, which for the most part is our customer.'"
Even so, CFO John Reyes said the company's tenants who have been in place for more than a year are behaving in much the same way they have for the last decade, and accepting annual rent increases in the average range of 8% to 10%.
Even though Public Storage has experienced some "sluggishness" in new leasing, Reyes said, "we're not seeing tenants picking up and leaving any more than they normally would."