Apex storage investments have become increasingly popular in recent years as a way for investors to gain exposure to the growing self-storage industry. Self-storage properties allow individuals and businesses to rent storage units to store their belongings, providing a steady and stable income stream for storage owners. Apex storage is one of the major players in acquiring and operating storage facilities across North America and Europe. Investing in apex storage can provide investors with potentially attractive yields and growth potential driven by favorable industry trends. In this article, we will analyze the profitability, risks, and future outlook for apex storage investments to determine if it is a suitable investment option.
Apex storage has delivered strong financial performance and high dividend yields
Based on recent financial results, apex storage investments have generated robust net operating income (NOI) growth and cash flow. For example, in 2020 apex storage grew its NOI by over 15% year-over-year. This has allowed the company to pay an attractive dividend yield to investors, averaging over 3% in recent years. The self-storage industry enjoys high operating margins given the relatively low maintenance costs, providing upside potential for NOI and dividends going forward. Apex storage also benefits from economies of scale given its large property portfolio spanning millions of rentable square feet.
The self-storage industry possesses favorable characteristics for investors
Several attributes make the self-storage sector appealing for investors. First, demand tends to be stable throughout economic cycles as storage space is linked to life events like moving homes, college, or storing business inventory. The industry has historically seen steady occupancy rates between 80-90%. Second, self-storage requires very little capital expenditure after properties are developed, leading to high profit margins. Tenants also tend to stay for longer durations given the hassle of moving belongings. Lastly, the fragmentation of the industry allows larger consolidators like apex storage to acquire smaller facilities at attractive valuations and realize revenue and cost synergies.
Apex utilizes data analytics to drive higher occupancy and rents
Apex storage leverages data mining and analytics to improve performance at its storage facilities. By analyzing tenant behavior patterns and demographics, the company optimizes its pricing strategy and identifies opportunities to increase occupancies and rental rates. This has allowed apex to realize higher RevPAF (revenue per available rentable square foot) than the industry average. Going forward, continued use of analytics and yield management will be a competitive advantage for apex relative to smaller operators.
Debt financing remains a risk factor to monitor closely
A potential concern for investors is apex storage’s use of debt financing to fund acquisitions. The company’s debt/EBITDA ratio stands at around 6x, higher than some other REITs. While leverage can boost equity returns, it also makes the company more vulnerable to downturns and higher interest rates. However, apex storage has a manageable debt maturity schedule over the next 5 years and solid investment-grade credit ratings providing access to capital. Maintaining a prudent leverage profile will be key for apex storage to balance growth and risk going forward.
In conclusion, apex storage investments offer investors exposure to a stable and growing self-storage industry with the potential for attractive dividends and cash flow growth. However, its use of debt financing warrants close monitoring as higher interest rates could pressure profitability. Overall, apex storage remains a compelling investment option based on the defensive nature and fragmentation of the self-storage industry.