Shurgard Buys Stake in Morningstar
Jul. 17, 2002
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CHARLOTTE, N.C. (AP) _ Charles Barbo has a simple explanation for what allowed him to build his self-storage company, Shurgard, into an international chain with a market capitalization of over $1 billion.
``We are an enabling organization for procrastinators,'' the chief executive joked, referring to Americans' tendency to dump their extra stuff into a self-storage unit and leave it there _ month after month after month.
When it comes to his company's growth, Barbo is no procrastinator. Last month, he and his Seattle-based company made an aggressive move into the Carolinas, spending $62 million for a 74 percent stake in Matthews-based Morningstar Storage Centers.
Morningstar, founded in 1981 by Stephen Benson, operates 60 facilities in North and South Carolina and is known locally for amusing messages on its signboards _ ``Spring is canceled,'' for example, when temperatures soared into the 90s in mid-March.
Behind the punchlines, Morningstar faced serious challenges, said Benson, now the company's chairman. Self-storage demands huge capital expenditures to buy land and build facilities that don't generate revenue for years. When Shurgard came along, Morningstar was running out of $60 million invested by the Rothschild Realty fund.
``We were running to the edge of a cliff,'' Benson said.
With nearly 500 storage centers in 22 states and six western European countries, Shurgard is big and looking to get bigger. Barbo, who is in his early sixties, says he wants 10,000 Shurgard centers before he dies.
Shurgard's Morningstar venture is reminiscent of the way a certain Seattle coffee retailer achieved national ubiquity, buying up competitors in markets that already had a dominant coffee chain.
David Benson, Morningstar's president and son of the founder, noted another parallel between Starbucks and Morningstar/Shurgard: Both have convinced customers to pay extra for a humble commodity _ a cup of coffee or an extra closet.
Morningstar and Shurgard say they succeed by offering high levels of service, security and support. Both emphasize clean, well-maintained and well-lit facilities with 24-hour access and high-level security systems. Both run attached retail stores that sell boxes and other moving material.
Stephen Benson, who with his son will continue to run the Morningstar facilities after they take the Shurgard name, said the companies are a good marriage.
``What they build is premium in an industry that builds mostly junk,'' he said of Shurgard.
Shurgard's long-range ambition is to overtake industry leader Public Storage, the Glendale, Calif., company that has interests in 1,392 storage facilities in 37 states.
``I'm not alarmed by Shurgard's activities in the Carolinas,'' said Harvey Lenkin, Public Storage's president. ``It doesn't concern me.''
Ray Wilson, head of Pasadena, Calif.-based Charles R. Wilson & Associates, which appraises self-storage facilities, said: ``They are strong competitors and Public Storage, being the biggest operator, is constantly everyone's target.''
A database maintained by Wilson's company lists some 31,000 self-storage facilities in the United States and Canada. Asked about Barbo's goal of 10,000 Shurgard facilities, Wilson replied, ``To control 10,000 facilities would mean controlling one-third of the entire market _ an ambitious achievement indeed.''
About a third of self-storage spaces are used by corporations and small businesses, another third by people moving or remodeling, the rest by people seeking out-of-home space for their possessions, Barbo said.
Customers come from all walks of life _ from the defendants in Charlotte's recent Hezbollah trial who used a Morningstar unit to store cigarettes they were smuggling to Michigan, to actor Ben Affleck, who rented one while making a movie in South Carolina a few years ago.
Barbo has his eye on the mostly unclaimed territory of Europe and Asia _ despite the cultural challenge of selling non-Americans on a concept that's thrived on Americans' voracious consumerism.
``If Paris had the same per-capita self-storage facilities as America, there would be 1,300 facilities there,'' Barbo said. ``There are currently 40. Somewhere between 40 and 1,300 is an opportunity.''
Shurgard already is operating through a partnership in Belgium, Denmark, France, The Netherlands, Sweden and the United Kingdom. Barbo said he hopes to achieve further growth by selling the Shurgard brand to overseas investors.