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Subject:  Re: Self Storage as an Investment Date:  5/15/2003  12:32 PM
Author:  gurdison Number:  107249 of 888207

<The reason I ask is that your reports seem to indicate that residential rental property in your area is going gangbusters. It seems odd to have high demand for residential rental, but low demand for storage space.>


I would assume that this is probably due to the different markets. I have been a PSA shareholder (primarily through their preferred shares). They are the largest storage company in the country. They have some 90 million SF of net rentable space in some 80 US and Canadian cities. They recently hit a few bumps in the road, not because there are too few customers, but because of many others competitors in the field. It is generally a low barrier to enrty market. I would think that they would have a presence in Atlanta, but not necessarily in your area.

I think what you have done is to seize on an excellent opportunity in your particular niche market. In my area (NJ), we have seen many self storage buildings go up. In the last few years I would estimate that around 10 new facilities have gone up in a five mile radius around me. All of them are paved, air conditioned + heated, visable security, cameras, etc. I have no idea what the going rates are as the idea of renting out space for my "stuff" is about as foreign to me as wanting to take on a 60 hour per week job. The fact that so many have sprung up tells me that there is lots of demand. How profitable it is for each owner is another story.

Like most RE types I do not let the fact that a business may not have me as a customer exclude me from being a potential investor. PSA and PSA-T have been good investments for me. Just like with FI/RE, I think I am out of step with most of the general population with storage and stuff. I figure that you know your area. Your storage units would have cost you a lot more to build and maintain up here. Working the numbers on building here may have kept you out of the game. OTOH, the high end units built here would most assuredly have a much lower profit margin in your neck of the woods.

To use an old car analogy, your chevy would not sell as well here as the standard (rightly or wrongly) is a Cadillac. Conversely, the Caddys would be a sure loser of an investment in your local market where the Chevy is the best that the market wants. You have clearly placed yourself above your "rent a wreck" competitors, but have not cut off your nose to spite your face by building Caddys that would be sitting on the lot. I think this goes back to the heart of the old saying that all real estate is local.


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