Quick Take: U-Store-It, Someplace Else

This is bound to prove interesting as more facts come out. U-Store-It Trust (NYSE: YSI  ) , one of the few REITs with an interesting valuation, has just tossed its chairman, another board member, and a president at a subsidiary out on their rear ends. These three folks are the founders of the company that preceded U-Store-It Trust, and they all have the same last name: Amsdell.

What the Amsdells did is not exactly clear, but the company did update its guidance to account for charges related to a legal settlement on actions taken by the predecessor company, and there are some other interesting details in the company's 8-K filing. Whatever is ultimately found to have happened, the company believes that Robert J. Amsdell and Todd C. Amsdell (chairman and subsidiary president, respectively) did not act in the best interest of the company or shareholders in certain transactions. In response, the company terminated Todd Amsdell and asked for and has now received the resignation of Robert Amsdell. Barry Amsdell appears to have followed.

Ultimately, I view the ouster of the Amsdells as a positive for U-Store-It. Immediately after going public, U-Store-It expanded too quickly, and many of the properties the company acquired were directly from the Amsdell family. Such transactions can be legit, and the company also has a stake in properties owned by its new CEO, Dean Jernigan. But the size and scope of the agreement with Jernigan is smaller. In contrast, the agreement with the Amsdell family includes not only the purchase of properties, but also management fees and construction agreements. This leaves all kinds of places for money to leak out from U-Store-It and into the Amsdell family checkbook. Discovering whether happened will require waiting for the results of the inquiry. But whatever happened was bad enough that the Amsdells decided to step aside to save face for both the company, and, I believe, themselves.

The hiring of Jernigan as CEO less than a year ago gave the company some credibility, because of his prior experience in the industry before selling his business to General Electric (NYSE: GE  ) . Jernigan's subsequent effort to build out his management team and fill in important operational roles was another step forward that gave U-Store-It additional credibility. An improvement in results hasn't been seen yet, but when you compare the current management team's operational steps taken and communication with shareholders against what was provided by the original management the Amsdells brought to the table, it's not much of a contest.

Given that the Amsdells own approximately 20% of the company's outstanding shares, their involvement won't completely go away, and they'll still have some say in how the company is run. But overall, I think the new management team and an independent board will help the company become more focused and better able to compete with Public Storage (NYSE: PSA  ) , Sovran Self Storage (NYSE: SSS  ) , Extra Space Storage (NYSE: EXR  ) , and all the mom-and-pop local-storage operators.

Comments? Bring them here.

At the time of publication, Nathan Parmelee had no financial interest in any of the companies mentioned and was ranked 97th out of 23,203 investors in Motley Fool CAPS. The Motley Fool has an ironclad disclosure policy.


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