U-Store-It Posts Decent First Quarter

U-Store-It Trust's YSI first-quarter performance metrics were approximately in line with our assumptions, but we're raising our fair value estimate slightly to account for the time value of money and acquisitions and developments since our last update. The recovery continues in the self-storage sector. U-Store-It's same-store net operating income, or NOI, increased 2.6% from the first quarter of 2010 due to a 3.7% increase revenue that offset a 5.4% increase in operating expenses. Operating expense growth was unusually high in the first quarter due to snow removal costs, and excluding that, same-store NOI would have bumped up around 6%. Though organic profitability improved, we note that the same-property revenue increase mostly came from an average occupancy increase of 1.9% as rates increased just 1.1%. We're confident that the company can grow rate and occupancy through the end of the year, but we note that the rates could prove low, owing to U-Store-It's geographic sensitivity to harder hit California and Florida.