Question 1: What is your genetal assessment of Shurgard’s business? How has it performed, to date, in the US? Before performing any detailed valuation analysis, do you expect Shurgard to succeed in Europe? Our assessment of Shurgard’s business is that it is a company which has taken advantage of every single opportunity it has had. We consider them visionaries in the business of the self-storage. Step by step they have built such a “self-storage empire”. Firstly in the US and then in Europe, they have grown using a model which is really worthy.
In the US Shurgard manages a network of 2,000 storage facilities across the country to date, some of which are managed for third parties. The company’s facilities are spread throughout 38 states. The performance of the business started in 1972, when Charles Barbo founded Shurgard in Seattle. It operates as a self-storage management company which offers a variety of storage units for both households and businesses in buildings especially designed for this purpose. By the end of the 1970s Shurgard had 25 storage facilities in the Seattle, Washington area.
During the next years, the US self-storage facilities evolved and Shurgard was soon competing not only with individual mom-and-pop operators but larger corporations such as Public Storage, U-Haul and Storage USA. It was a simple business model with a very low maintenance and very high margins. In the 1980s, to distinguish it self from competitors, Shurgard came up with a new architectural feature such as a lighthouse tower in which the manager’s office was located.
By 1988, the company had 100 facilities across the US. Over the next 11 years the business grew, and by 1999, Shurgard managed 348 storage properties located in 20 states. Nowadays it manages over 2,000 storages throughout 38 states. The main reason why we think Shurgard succeed in Europe is that self-storage is a new business to explore and develop in Europe. As Dave Grant said, “There are 300 million people in the US and Canada served by more than 25,000 storage facilities.
In Europe, there 500 million people served by fewer than 200 facilities”. Europe exhibits the same self-storage fundamentals that prevail in the US, including very stable performance characteristics, low break-even occupancy, low risk cost structure, steady rental rate growth, low capital expenditure requirements and low functional obsolescence. The possibilities to expand the business to Europe are interesting and realistic, so the succeed of Shurgard in this market is a fact more than likely.
