U-Store-It Trust: U-Decide Its Potential

U-Store-It Trust (YSI) is a company Wall Street does not love right now, and yet I think its business has potential.

A self-administered and self-managed real estate investment trust [REIT], U-Store-It currently owns and operates nearly 400 self-storage facilities comprising more than 25 million rentable square feet in 27 states. Its top markets are in Florida, California, and Texas - states with growing populations, and thus, growing storage needs. But YSI has experienced management and administration problems of late.

An inquiry into improprieties involving employee non-solicitation agreements forced the chairman and COO to resign over the last year, and in March, it announced it was restating its 2004 and 2005 results and delaying the filing of its 2006 annual report, due to incorrect classifications of $90 million worth of short-term investments. An unseemly large bonus (four times base salary) was paid out to its former CEO, despite his poor results, further eroding investor confidence in this company.

No question, the company has been poorly run. But founder and former chairman and CEO of Storage USA, Dean Jernigan, took over as YSI's new CEO this past year. Jernigan inspires confidence in Wall Street insiders, who think he may have the stuff to right the company's many wrongs.

Self-storage is a growing business. As construction slows, rents rise. People and business need to find rental space to store their junk (and let's face it, we Americans accumulate too much junk). So the housing bust is, oddly enough, good news for storage facilities. U-Store-It plans to drive growth both through increased rent and occupancy. It consolidates the much fragmented storage business to improve margins.

And I love YSI's focus, setting it apart from some of its competition: Convenience for the customer. Its storage facilities are near retail centers, providing easy access for customers. Most facilities have onsite property managers. Its sites are also secure and most feature wide aisles to accommodate large trucks.

Type of Stock: Getting a beating of late due to poor management problems, U-Store-It may now be on track with a solid CEO and a good self-storage growth model.

Price Target: Wall Street doesn't like YSI right now, particularly after it announced in March that it has to restate results in 2004 and 2005. The stock price has fallen to $18.71, having reached $23.61 in the last 52-weeks. I would think about picking this one up if it dips to $15 and then ride it back to $23, where I think YSI can certainly go under its new CEO.

YSI 1-yr chart:

Comments

[oceandude]

I agree with you. However I think your $15 buy target is never going to be met. I believe that would be an all-time low for the stock. I think around 17-17.50 would be a good time to jump in.