U-Haul Holding Company (UHAL) Earnings Call Transcript & Summary

Hello. I'm Joe Shoen, speaking to you from Phoenix, Arizona. U-Haul first entered the self-storage business in 1973 by converting an existing building. I wrote my thesis in business school on self-storage in 1972. Having grown up in U-Haul, it is as clear to me now as it was then that self-moving and self-storage are complementary products and services. Of course, this isn't a new connection. Moving and storage have been marketed together since at least the early 1900s in the United States. U-Haul is currently the third largest self-storage operator in North America based on a number of locations and the fourth largest on a square foot basis. We offer over 812,000 rentable storage units and 70 million square feet of self-storage in the United States and Canada. While the self-storage industry continues to undergo consolidation, it remains highly fragmented. U-Haul maintains a presence with many of these local operators in 2 main ways. First, more than 5,700 independent self-storage locations supplement their income as U-Haul dealers and leverage uhaul.com, the most widely trafficked moving and storage website in the world. U-Haul storage dealers are listed there side-by-side with U-Haul stores based on geographic proximity to the customer. Second, launched in 2003, U-Haul self-storage affiliates is an alliance of 3,700 independent self-storage operators who are powered by the lowest cost, fully integrated self-storage business platform in the industry. These affiliates also enjoy an industry benefit unlike any other, a connection to millions of online customers visiting uhaul.com. At our company-owned and operated locations, we go to market with moving and self-storage as a combined product offering. For decades, all new U-Haul company locations have had a self-storage component. In 2009, we started U-Box, which has both a self-storage and self-moving characteristic. I will spend some time now reviewing some of our more recent self-storage projects. With all the CapEx that has been dedicated to acquisition and construction, I trust it's a subject that will interest you. There are 4 ways U-Haul comes to open a new facility, new construction, converting the existing facility, redeveloping a present U-Haul store or purchasing an existing facility. The first method, new construction, of course, is not only expensive but very time-consuming. However, you're going to see us rely a little bit more on that in the present time. This is our facility in Cheyenne, Wyoming. It's a bare ground project. We built it. It has U-Store self-storage, mini-storage and U-Box, so it basically has a complete product. You can see the U-Box building over to the left on your screen. This is our store in Lakeville, Minnesota. It's a fast-growing suburb of Minneapolis. You can see in the foreground a typical self-storage business. And then at the rear of the building is a U-Box operation. Additionally, we have, of course, parking for our U-Haul product and in the back a vehicle storage. So this is about a 10-acre project. It's been completed almost a year at this point, and it's filling nicely. This is our newly constructed facility in Bremerton, Washington, home of the U.S. submarine base there. The store here is primarily self-storage, and it's operated actually remotely from another store we have about 4 miles away that was very space constrained. So this allowed us to expand our products and services, better compensate our team members because they create more value this way. This store has been opened almost 18 months, is running up very, very well. What you're seeing here is 139,000 square feet of self-storage and the smaller building to the left, U-Box in Murfreesboro, which is a suburb of the red hot national market. This store has been completed almost 6 months, to rent it up very, very well. We're up over 400 rooms thus far. I'm confident that this store is going to be a major success going ahead. As you can see, it's right on a freeway at the access point. This is what we would call a 5-star location. It's just terrific. It's going to do nothing but prosper. This is our recently completed store in Lake Forest, California. That's an Orange County affluent suburb, very difficult location to get into zoning wise. This was formerly a 3-acre nursery. We bought it, tore down the nursery, and we were in development with the city for almost 3.5 years. We now have the location up. It's renting well. You can see the showroom here in the small building attached to the larger self-storage location. And then you see a U-Box building towards the front. Here, of course, very stringent parents standards were enforced by the city. So the location doesn't quite display as well as I'd like it to, but it's doing terrific. Here, you see some in-progress pictures of our project in La Vergne, Tennessee. La Vergne is going to be comparable to our recently completed project in Murfreesboro. It's in a 5-star location. It will rent up fast. It's a 10-acre location. It features U-Box. Here, you see that the warehouse under construction, and it's done at the end of this month. I expect to see a very fast rent up. Here, you see a project that fronts on Interstate I-17 in West Phoenix, Arizona. This project will complete before December. Here, you see the third floor going in. On the same property, we have a repair facility, and we have a regional marketing office. Again, another solid project, good freeway access. Here you see a rendering of what it's going to look like when it's complete. This is a facility in Queen Creek, Arizona, another difficult land-use situation. Here, we actually started with a 30-acre parcel subdivided. It brought in an automobile dealership as our partner, use that to go to the city because they were desirous of getting the sales tax revenue from the car dealership, and we were able to use that leverage to get our business in on the balance of the property. We have U-Move here, U-Box self-storage and a considerable amount of recreational vehicle storage. The second way we have expanded is through conversion. Our strategy we refer to as adaptive reuse. This is central to our corporate sustainability initiatives and also aligns with the desires of communities to preserve historically significant buildings or put vacant buildings to productive use. This is a 16-acre conversion of a former Walmart in Kalispell, Montana. Kalispell is kind of the shopping center for white fish, which many of you may be familiar with. This location, we're doing our final build-out in it now. Nearly all the rooms are full as fast as we build them. They're filling up, doing a solid U-Move business. And it also puts us in the U-Box business with a relatively affluent demographic. So this is a very successful store. This shows you some pictures of a conversion in Casper, Wyoming. This is what it looked like before we started. It was a big cement plant right on the freeway. Of course, Casper is a big thing. If you are in Wyoming, it's not that big a town nationally, but it's a very solid market for U-Haul. Here, you're seeing some of the minis and some of the vehicle storage. Again, this project, we will probably continue to develop for 3 more years. As we fill up storage, we'll construct more of it. This is a 21-acre nearly 200,000 square foot conversion of a former Kmart facility. You can see the ample parking in front, huge one-story building. We also are able to feature mini storage because of the ample parking lot. You see in the foreground we have for sale trucks. So we're selling trucks off this lot also, our surplus, what we call rotation trucks. This facility, again, is hugely successful. Right now, our manager here is running the highest increase in net rooms rented over a 12-month period, very, very great success here. This is another Kmart conversion. This one is in Detroit on Telegraph Road. It's about a 15-acre facility, about 130,000 or 50,000 square foot of buildings. You can see we have ample land to continue to increase our product and service offering over the years. It's a very forward-looking facility, very competitive in the Northwest Detroit market. I think this will be an anchor for us over the next 2 decades. This is a project in new center Detroit. You may remember this. I showed it in an earlier presentation. This year, we have now finally completed building out the entire building, so we phase this in. We did 2 floors to start, and then we continued to build out. We now have completed the final floor, and we are constructing a U-Box building in the foreground here where you see the trucks parked. So this location has allowed us to continue to grow, increase our product offering, increase our investment for now, almost 8 years to its final build-out. This is a 13-acre facility. It was a former warehouse in Woodland, California. This is our closest store to UC Davis, about halfway through the conversion. Of course, we're open with U-Haul and U-Box. The U-Store is coming along. We have at least 5 acres of absolutely bare land here that we'll continue to develop over the next 2 or 3 years. It's right on the freeway, shows beautifully to the freeway. This will again be a solid rock in the foundation of U-Haul for decades. This is a former pair of office buildings in Duwamish, Washington, which is a south suburb of Seattle. It's about a 12-acre facility, well in excess of 200,000 square feet. We're about 30% through on the conversion. So we have a redeveloped showroom. We have U-Box. We have U-Move and self-storages gradually fill up. We'll build these 2 buildings out floor by floor. It will probably take us 4 or 5 years. Here's another Kmart conversion. This one in Maui, Hawaii. It's located on the road from the airport, it abuts the Costco location for any of you who've been to Maui. We have ample parking lot. It's over 7 acres of fee ownership land, which is hard to find in Hawaii. We've built out about 1/2 of the project. It's renting up. We're completing the second half of the interior. And then we'll expand more products and services in the ample parking lot. The third way we expand is through redevelopment of existing U-Haul locations that will prosper by redevelopment in a more intensive manner. We have many locations that we bought in the '70s or early '80s, where we really didn't provide enough room for our self-storage and U-Box product. This particular store is in Florissant, Missouri, which is a prosperous suburb of St. Louis. You can see on the left, the orange star, that's our original store. It's a former gas station. It's right at the intersection of 2 very, very busy roads. We then purchased about 2 acres right down the street there to the right and constructed that building. And now the same manager and the same crew runs both facilities. We've been able to add a very modern, very competitive building that has tremendous display to the street. It has both a U-Box and a U-Store component. The U-Box is in the rear in the picture you see here. And we have a load on load area for our self-storage customers. Here, you can see it displays very beautifully and very competitively to the busy street. This is the existing store, which we reimaged and redeveloped in order to allow it to be able to sell into the remote location. About 1.25 acres, very, very tight location. The truck rental fills it up. This now will expand the store massively. This is a redevelopment in Bloomington, Minnesota. Bloomington is a suburb of Minneapolis. In the foreground, the low building you see is our original store. In the rear there, you see the new construction. We actually purchased about another 1.75 acres across a little cul de sac street and we will move the entire operation to the store in the back. We are now tearing down the store in the foreground, and we will build a large U-Box facility on that land. Here, you can see how it displays to the street. Bloomington is another one of many communities that is very difficult to get into on land-use basis. This took many years of working with the city, and this will be a rock for many, many years to come, very successful location. We're now going to take a look at our location in Downtown Houston. This was a site slightly less than an acre. You see the existing store there and the picture labeled 2016 and then you see it torn down, and you can see the residential buildings that surround this location. We now have built and are running out of a 6-story building on the site. The first 2 floors are U-Haul truck rental parking. The building comes within 5-foot of the property line on all 4 sides. We are surrounded by one-way street. It's a very typical, very downtown location. There's a great deal of residential multistory development in this area of Houston as there is in many downtowns and how to change our facility, which was originally primarily a truck rental facility into a facility that can offer both U-Move and U-Store products, took a little bit of work, but I think we have a successful product offering here at this time. This conversion appears that it's going to be successful, a little bit pricey to get in here. But I think this part of Houston is going to be prosperous for decades. This is a ground-up operation in Power Ranch. You see the U-Box warehouse under construction. We had previously owned a 2-acre self-storage site. We will now combine them all, and we'll have exterior drive-up minis, a big U-Move component, a big interior climatized storage location and U-Box in a solidly growing suburb of Phoenix. Here's the site. And in the background, you can see our self-storage location. When the project is complete, we'll pull down the wall between them and join the lots. Finally, in some markets, it makes sense for us to buy existing self-storage product. Buying self-storage locations, existing locations has become very, very competitive over the years. People are paying very strong cap rates. This is a facility we bought because it accessed the Central Nashville market, which we didn't have a good enough product offering in. It's about 140,000 square feet. It's about 1.5 acres. It has very, very little truck rental space. You can see we're going to maybe have 8 trucks there at a time. We have a large amount of rooms. This facility just recently hit 90%. It's a successful location. As time goes on and we remain stabilized, we'll be able to get rent increases and it displays nicely to the I-24, I-40 corridor there in Nashville. Here you see a location that we bought in Vacaville, kind of north of the Bay Area. A developer built it. He'd been open 2 months. We've been in conversations with him. And we acquired this when it was somewhere between 10% and 15% occupied. It's fully occupied now. It will do a strong U-Store business. We aren't going to be able to offer U-Box here, so we have a nearby facility that offers the U-Box product. And we'll do very modest U-Haul truck rental here because we have another location in the area that can very adequately handle that. But this is climate controlled storage, very competitive product, a good location and we were able to buy at what we consider to be a fair price. This is a facility in Annapolis, Maryland. It had formerly been managed by Extra Space. It abutted a facility that we were developing, and it was too good an opportunity to pass up. It displays terrifically to the Interstate highway. Annapolis, of course, is the home of the Naval Academy and a very upscale highly mobile community. We didn't have a strong U-Haul company operator presence in the market, so this accomplished several objectives and we have enough extra land that before Christmas, we'll begin construction of a U-Box facility. So this should be a very solid contributor for decades to come. This is a location in Port Charlotte, Florida. It displays nicely to Interstate 75. The location was built by a developer. We were in conversations with him throughout construction. We were able to purchase it when he got a CFO. It has an additional acre of land with it that we will construct a U-Box facility on. The location is renting up well, and it was in a part of the market that we did not presently serve. So I look forward to this being a success for many, many years to come. As you should expect, U-Haul provides a competitive self-storage product offering. U-Haul is different from our competitors in many ways, particularly with our combined product offering and a true North American strategy. This is distinct from our REIT peers who have their own strategy, which works for them and their model. Our strategy includes being in neighborhoods, markets and states and provinces that others may not be because U-Haul customers expect that our network of products and services will be accessible to them wherever they are in North America.

Hello, and welcome to the 2021 AMERCO Virtual Analyst and Investor Meeting. Thanks for joining us today. Today, we'll look back at our performance in fiscal 2021 and the first quarter of fiscal 2022. Before we begin, I'd like to remind all participants of the webcast that certain of the statements during this meeting, including, without limitation, statements regarding revenue, expenses, income and general growth of our business, may constitute forward-looking statements within the meaning of the safe harbor provisions of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Certain factors could cause actual results to differ materially from those projected. For a discussion of the risks and uncertainties that may affect AMERCO's business and future operating results, please refer to our most recent Form 10-K filing with the U.S. Securities and Exchange Commission and any updates as may be provided in our periodic 10-Q filings. The virtual platform for this meeting is an important part of our corporate sustainability initiatives. This is our 15th consecutive year hosting a virtual meeting. At this time, I'll now turn the webcast over to Joe Shoen, Chairman of AMERCO.

Welcome again to the live part of today's Virtual Analyst and Investor Meeting. Joining me today are a few key people from the U-Haul organization. Sam Shoen, my son, manages U-Box and is Vice Chairman of AMERCO. This is Sam's 28th year with the company. Royal Shoen, my daughter, is a customer service representative. She worked at the company all during her schooling and has been working at centers since graduating from George Washington University 2 years ago. Jason Berg, our Chief Financial Officer, has worked at U-Haul subsidiaries for 25 years. J.T. Taylor is President of U-Haul International, and he's been with U-Haul for 40 years. Parul Butala is Director of Land Use for America Real Estate. She has been with the company for 27 years. Dennis O'Connor, Vice President of Storage Operations, has been in this position for 22 years. He has been with U-Haul for 29 years. During the presentation, you can key in questions and commentary on your screen. After our prepared remarks, Sebastien will ask those questions of our panel here today. I'm going to turn the meeting over to Jason to walk us through some of the financial highlights.

Thank you, Joe. On our Investor Relations website, amerco.com, we have a link to what's called special materials for today's presentation. I'm going to touch on a few of those slides right now. Last year at this meeting, I was discussing with you how for the first quarter of 2021, really the last 10 days of March the previous year, our U-Move revenues, the equipment rental revenues were down approximately $115 million due to COVID. Looking first at Slide #5 in the special materials. You can see on this chart that we finished fiscal year '21 with U-Move revenues up 15% or $390 million. We had a great last 9 months of the year. And that continued out into the first quarter of this year with an improvement of $381 million, albeit against a weaker first quarter. The last 12 months have now brought our 10-year average growth rate for U-Move revenue, up above the 7% mark. The improvement over the last 12 months, about half of it has come from increases in transactions. And the other half has been split between average miles driven per transaction by our customers and also average revenue per mile or rate. We've seen these improvements take place across the one-way market, the in-town market and what we call corporate accounts or what others might refer to as last mile business. Our fleet plan going into last year was for limited fleet growth. And while the chart makes it look like we accomplished this goal, what you don't see is the inability for us to bring in enough new equipment and thereby properly rotate the fleet. Fleet rotation for U-Haul is the retiring of old equipment and the replacement of that with new equipment. Our manufacturers have been challenged by COVID and now the microchip shortage. As they bring their production lines back into regular production, I would expect to see the next 15 to 18 months elevated capital expenditures for us on the fleet side. A couple of thoughts on self-storage. The industry in total has seen a dramatic increase in demand kind of across the board. I think we're still trying to determine whether or not this demand is temporary in nature or more structural. It really makes -- does not make a difference to us from a strategic perspective or for our growth plans. We had intended to reinvest back into self-storage before the last year, and we're going to continue to do that regardless of what happens in the future. At the end of July, our owned portfolio, combined with the properties that we manage under the U-Haul brand name, totaled just over 72 million square feet. From a performance perspective, in the first quarter of this year, we saw a large improvement in overall occupancy. Our entire portfolio of storage properties that we own improved 12 percentage points to an average of about 80%. If you were to break out just the component of that, that we call stabilized or has been an 80% occupancy or better for the last 2 years, those properties increased about 4% to an average occupancy of just under 97%. Comparing October of this year to October of last year, we increased the number of occupied rooms by 98,400. It's about twice the pace that we were at last year at this time. In fact, it left us with just under 100,000 available rooms left to rent or about a year's supply at this pace. We're currently in -- we're currently building out another 89,000 rooms right now. So you can see our challenge as we expand the distribution network is going to be whether or not we have enough self-storage to continue to fuel this growth. Speaking of growing storage locations. CapEx has long been a theme for us, and it's going to continue to be in the future. The last large influx of, I'll call it, outside capital took place in fiscal year 2018 when we sold a portion of our Chelsea, New York location. And we reinvested the $200 million in proceeds from that sale into increasing the pace of self-storage development. Based upon the liquidity that we have today on the balance sheet, we're poised for another large increase in investment for self-storage. Using Slide #9 as a backdrop, the next 3 years are likely to be very similar to what you see in this chart for fiscal year '18, '19 and '20, where we dramatically increased the number of acquisitions. In fact, over those 3 years, we invested close to $2.4 billion between acquisitions and construction costs. Also during that time frame, we started with an elevated cash balance, and we slowly worked that down over time, and we didn't really get it worked down completely until just the onset of COVID struck last year. Based upon the liquidity that we have right now, that trend may be similar. We will be running with higher cash balances for the foreseeable future until we can reinvest those funds. Over the last couple of years, we've been decreasing the number of new facilities that we've been buying. However, we are now beginning to increase the pace of new acquisitions. And on Slide #8 in the materials, the last column shows how many deals that we have in escrow right now. And it currently shows about 98, and that number changes almost on a daily basis, but it's been running somewhere around 100. To put that into perspective, over the last couple of years, we've averaged about 40 properties in escrow at any given time. Calendar 2020 was a year where prudence dictated that we slow our expansion in order to preserve liquidity for the worst possible case scenario of COVID. The slowing of our expansion, combined with the increased customer demand, has highlighted the value of the investments that we've made over the last 5 years in self-storage and in the fleet. For 2021 and 2022, our plan is to get back on track with additional fleet CapEx and continue to expand the reach of our retail locations to serve our customers better. From the cash that we have earned over the last year from operations, combined with some liquidity options as part of our underlevered asset portfolio, these 2 methods are going to facilitate these plans as we go into the next couple of years. I'd like to thank you for the time. And Joe, I will hand the meeting back to you now.

Okay. Sebastien, you have some questions, and you're going to ask them, and we're going to try to parse them out. I'll try to direct them a little bit, but we'll see how it goes.

[Operator Instructions] So the first question that we have is post COVID, can management share any insight into strategic changes to the business that might evolve in the years to come?

Okay. I think maybe Dennis, you and J.T. could speak to that.

Sure. I'll start. I guess post COVID, what I found is it's really validated the resources that we had put into things like contactless rentals, 24/7 storage rentals, those kind of things. And the resources that we put into those were well before COVID was even a variable, and I see those services that the customers are demanding of us just growing and growing going forward.

I would double down on what Dennis is saying. We had our Truck Share 24/7 program in play. When COVID came around, we had a significant number of customers that really wanted to have contactless transactions, and we were able to serve those customers, serve them throughout the day. Even when our stores are open, we were able to serve those customers. Outside of that, though, I don't know that COVID has a significant role in what we do strategically. I think we really need to continue looking at performing and doing the fundamentals of our business, working distribution, increasing utilization and continuing to increase the service to our customers. Our stores this year through COVID did a tremendous job. I mean yeoman's work in helping those customers. And I think we have to continue to perform at a high level with those fundamentals and I think as a result, we'll continue to get positive results.

Yes, I'd echo that. And I think that post COVID, it isn't going to be so critical. We, like a lot of people, have no idea. We got a big bump, both moving and storage during the last year of the pandemic. We have no idea if that's going to continue or not.

What is the average NOI margin of a stabilized self-storage facility?

Jason?

Thanks. So I'm going to go through first my normal spiel about how our locations don't necessarily line up directly with what the competition does from our product offering. However, I'll try to answer the question as best I can. So the storage competitors who report publicly are routinely reporting an NOI margin in the high 60s to maybe 70%. For us to try to get any sense of how we compare, my analysis team went and looked at facilities that we have that most directly line up from a service basis with the public REIT. So these are locations that are heavy on storage but low on truck rental, low on U-Box, low on everything else. And what we found in those locations for stabilized locations, we run very similar NOI margins in the 65% to as high as 72% range. When you start adding more services to the mix and you begin splitting up the profit amongst different types of products, it becomes a little bit harder to properly allocate costs and a little bit more difficult to give you a specific number. But what I will say, based upon the facilities that we have that line up most with our competition, we're running right about where they're running from a stabilized margin.

In the intro, you showed a number of Kmart conversions. Have you explored other potential types of real estate assets? It seems like there are many big boxes attached to dying malls. Do you have any experience with those?

I like the Kmarts, and I thought we had some pretty ones there. But yes, we've looked at other retail boxes. And we've done several different types. We've also done a couple of anchors in malls and some repositioning of some retail space in the ring around the mall. That's considerably more complicated than doing a Kmart. And maybe, Parul, you could talk to what really happens there.

Sure. Thanks. So like Joe mentioned, we have had experience with doing other asset types, including a Macy's that we did in Pennsylvania. We worked on former Yonkers in Cedar Rapids. It's in the Westdale Mall. We've done those, but those are increasingly harder to do and more difficult, primarily for 2 reasons: one, because of the zoning and the city vision. City has their own visions when a mall is dying, that they want to do a mixed use. They want to do residential, et cetera. And our users necessarily don't fit into that vision. And then the second part that's really challenging is the CC&Rs and the REAs, which are the restrictions put in because of parking agreements, access agreements and other mall-type agreements that we have to abide by, and that makes it exceedingly difficult for us to run our operations.

Yes. We still have a Macy's on our books that it looked like it was a go and then all of a sudden, the city changed their vision. And once they changed their vision, this ground to a halt. So these -- we thought we were in. It all looked good. We thought we'd overcome all the REA problems, then the city has a "vision" and their vision is ordinarily a mix of low-income housing with nice housing, and we'll see what success they have in executing that.

With cash piling up on the balance sheet, what plans does management have to return cash to shareholders? Would management ever consider a dividend policy that pays out a percentage of net income to shareholders? If not, why not?

Well, I don't know about a percentage of net income. But at the Board level, we've discussed more than once a more consistent dividend policy than we presently have. Of course, I'm a shareholder. My whole family is shareholders, so we're with people who like dividends. But at the same time, I think very, very much, we're still in the growth phase of this operation, and we don't need to take too much profit out of it. There's a lot of opportunity to reinvest.

I'll add to that. I think I'll echo what Joe is saying as a Shoen shareholder, I normally don't like to speak for the family, but certainly Shoens like dividends. I would point out that we've been paying a dividend for somewhere around a decade. But if the question is wanting more, I think it comes down to how you want to treat the golden goose. I think there's a school of thought, which is a prudent person would want the goose to get fatter, especially when the company has a track record of showing when we reinvest into it, we can grow.

Thanks, Sam. What is our conclusion from Truck Share 24/7? And have we made any modifications to that program or the processes?

J.T., that's a U-Haul question.

Yes, I'll take that one. Well, I think I'd start with our customer reviews. Our customer reviews have indicated that our customers use it, and they like it. So I think that's the best place to start. We've done transactions all across -- in every state, in every province across our entire U-Haul center and dealer network. In fact, we have a bunch of metrics that we follow, and I'm aware of 2 customers that have used it over this time, 300-plus times. So that's all very exciting. I think with COVID, COVID gave it a bit of a push. And I think our customers, again, I mentioned earlier, like the contactless nature of the transaction, and that pushed it ahead. Our team liked it. It helped them be a bit more productive. So I think that's been very positive. Our still same reviews and our own evaluations, we've made many, many changes, countless changes really and modifications and tweaks, and we're going to continue to do that as we learn more about what our customers want to try to provide them with better service.

Well, some of the feedback I see from the center themselves is that the customers would like the process to be a little bit faster, especially in the beginning. And so one of the changes we made was to expand our 24/7 team, both corporate and work from home to match that demand.

Over a business cycle, what would AMERCO consider an acceptable return on equity for the business?

Jason?

Thanks, Joe. So over the last -- I'll go back the last 10 years where that's encompassed just about every type of cycle that we can have. I think we've averaged around 17%, and we feel like that's been a pretty successful number for us.

It seems like a high bar to me. But of course, I'm for maximizing what we can, but it all depends on your time horizon. I tend to have a 10-year time horizon more or less.

Joe, is managing outside partnerships' self-storage units as profitable as owning them ourselves?

No. For sure, you're not participating in the appreciation of the property. Now we managed onetime 100, a little over 100 units spread out across the country. And at that time, we were able to negotiate varying, but we were able to negotiate participation in appreciation. That's not available in the market presently. There's a lot of people want to manage for you. So I think you have to say that managing someone else's is not as profitable. Now a different question would be, are we open to going back into that? At the present rates that I see, which is people are managing. Public Storage recently told me they were going to manage for 4%. At 4%, you're going to lose money is my -- at 4%, U-Haul would lose money. I'm not going to say what Public Storage is going to do. 4% U-Haul would lose money, and it would be squandering our resources. Now on the other hand, we have what we call storage affiliates, which we have at least somewhere around 3,500 of those across North America right now. And so we're participating in them in serving the market and continuing to build brand identification, which is another objective, why I asked myself with Public managed for 4%. Well, if it puts them in a market they're not in, it gives them a footprint, it gives them a customer relation. I can imagine that may be the reason they're doing it at that. But I don't see us going back into many more third-party-owned U-Haul managed, although I'm open to the idea. And as I said, one time we had over 100 of them, that could switch.

When the company makes new hires, what do you think surprises them in a good way regarding the company's culture? Where could the business make strides improving its culture?

Sam, you're right. I'll let you take.

I'm just feverishly writing a couple of ideas here. Well, I think the first thing I'd say is that I'm approaching this in the context of U-Haul, not AMERCO and maybe that's an illuminating item right there. I think it's a U-Haul culture, not an AMERCO culture. The 3 things I wrote down, long tenure of your teammates. I hear that repeatedly. The ownership mentality of our team. I think mentality and literal ownership because we have an ESOP component, and that your chain of command is made up of people who started at the entry level. But I think Royal might be another good person to ask being that she's a little closer to it than me.

So out in the field, I see new hires are expected to work hard but not harder than or not harder than upper management is willing to do themselves. So for example, there's many times we've met new hires traveling. And they are shocked and impressed that the CEO or any upper management is out there with them hooking up a trailer or giving them insights and really entrenches with them, and it reinforces that we are invested and devoted to our team members in the field.

Would management or the Board ever consider implementing a compensation plan that shows outside investors key financial metrics from which management is judged and paid? If not, why not?

It's a couple of things to that. First of all, every business unit runs on a P&L that's updated daily and closes monthly. Every business unit, that means every single store we've got across North America, they're running on a P&L and that figures into their compensation. Then every business unit above them, what we would call a marketing company or shop or U-Haul International that J.T. runs, they all run to a P&L. So we have plenty of metrics. Now I think the definition of management, I may have a different -- I'll speak to 2 levels of management. Broadly distributed, the men and women you saw in that video, the men they kept popping up on the screen, those people are each managing a multimillion dollar facility. And they are clearly on financial metrics. If you go to the, what other people might call, top management or the people in this room, not one of them is compensated based on a financial metric. So everybody is, but then no one at the top. And I think that may be just ops and what the questionnaire is asking, although, I don't know.

We appear to operate a less dynamic pricing system for our self-storage units than REIT peers. Are we pursuing a remedy to that situation? And if not, why not?

Dennis?

I'll take that one. Yes, we have a less dynamic pricing structure than our REIT peers. That doesn't mean that we're not very, very conscious and sensitive to yield management. I appreciate as Jason said earlier with the NOI question that people want to draw a direct comparison of U-Haul pricing to the REIT. I'm going to caveat that quickly with our growth primarily over time has been -- has not been in the top MSA markets. So the comparison gets a little more difficult. I too will try and answer the question. Our customers are looking for consistency. Our personnel are looking for consistency. We surround our price at value pricing. We surround it with a sense of fairness and try and be consistent. With that consistency, the customer, it alleviates conflict. The prices are posted on the wall. The customer is able to shop. They know exactly what the price is going to be. I'm not saying that the REIT strategy, clearly, is having some success. That's just not our plan going forward that I see. Our plan is to continue to value price our product, couple that with a competitive pricing strategy, and then ultimately, in the end, the customer will choose the product and services that they perceive the most value with.

I think that underpins everything we do. We believe that in capitalism, the customer picks the winners and losers, and we're trying to please the customer.

In the recorded segment, Joe mentioned that cap rates have been quite low for self-storage product. Are you considering the sale of any of your mature self-storage product into such a strong market?

No. We get inquiries from time to time, but mostly, it reflects the lack of awareness of the storage market of the proposed buyer, which is also alarming. There's people who don't know that we're not selling. Yet, they're armed with several million dollars, tens of millions or hundreds of millions of dollars. So that kind of goes back to how the cap rate is doing. Well, with that many bidders, you bet there's some real opportunity if someone wants to sell. The -- we sold the one place, the one store that Jason mentioned, but that was the elephant that was not a reoccurring event. You saw us redevelop Houston, Texas. I don't know what that property would have sold for, but $10 million or $20 million, I don't know, but there is no property available in Downtown Houston. You'd have -- I have no idea what you would have paid, but it would have been considerable. So we redeveloped that it made a more intensive use. And we have many locations that we need to do that on. Parul, you've done some work on land use trying to redevelop. So maybe talk about maybe Seattle or Phoenix. I know you're working on projects in both places.

Yes. And the redevelopment comes with its own challenges. The cities are getting more and more difficult to work with. The biggest challenge we face with redevelopment is the land use is usually grandfathered in. What that means is that over time, when we bought the property, it was zoned for our users. But now after 20 years or so, the area around has changed to a more commercial retail. And so they've changed the zoning and kind of zoned us out of it. So those are some of the challenges. The other challenges are infrastructure improvements that are being expected out of us, sidewalks, landscaping. Sometimes, we are in overlay. That is like a scenic overlay or a highway corridor. So there are all these design guideline requirements that also are required to meet in terms of materials, aesthetics, et cetera.

But our preference is going to be to redevelop unless it's just simply impossible to redevelop. At that point, economics will drive the logical conclusion. But I'm pushing hard on us, building our expertise in redevelopment, because these -- the circumstances that you encounter with the city are repetitive. They have a vision. The vision is not in the zoning code. They want residential. It's not a residential area. They're planning to put a hiking trail right through the middle of the property, and they just got to wait till somebody wants to apply for anything, and they're going to blackjack you for a hiking trail. So there's -- they want the river front. It's just -- it's kind of -- it just goes on and on. And every one of them, we have to go try to push back on and see is there an economic advantage that's salvageable and that we can still comply with the present desires of the people in land use. The good news is those change. They're running a wave. And I'm sure in your 27 years, you've seen a number of waves come through.

Yes, absolutely.

At one time, if we wanted to build close to the street, they said there's no chance. And the taller you build, the further back you had to build. And what's the present circumstance?

Yes. Now it's the closer. They want to as close to the street as you can get and as tall as you can build. So Joe is absolutely right.

It's -- but that's good. So this goes in cycle, and we'll hopefully catch some of these when it cycles our way next time. And we've taken advantage of some of this like the Houston property on 3 sides, it's on the property line. On the fourth side, it's 3 feet to 5 feet off the property line. Well, they would have never allowed that 10 years ago. Now that was an opening. Houston wants this high density. We gave them high density. So we kind of have to adjust to it. But selling it is limiting our opportunity or taking Sam's analogy, it's parting with the golden goose. Well, these locations are precious. We have them. So I'm not going to say never, never, but that's not our strategy selling them.

I'd like to maybe interject on that. I think one of the things that's a little bit of an awkward comparison is when you're taking one of our self-storage competitors who's full and mature, they're out of things to sell. When U-Haul self-storage is full, we've got a lot of blue sky ahead of us. U-Box, hitches, propane, trucks, trailers. Operationally, I never look at any of our facilities as mature, because we have 40-year-old facilities where I look at and see tons of potential left still. So I think you've got to expand your scope beyond just self-storage.

Leverage for AMERCO is low considering the value of the self-storage assets and the cash generation of the truck rental business. Also, interest rates are at an all-time low. Would AMERCO consider recapping the self-storage assets with a higher level of long-term fixed rate debt? And if so, what would management then do with the excess cash? We've gotten a few questions on this. Would management consider paying out a large special dividend?

Well, I'll answer for management and presently, no. So I think we have opportunities. Now Jason might try to address the concept of how to maintain leverage and what he's done.

Sure. So the question is spot on is that our treasury team we're constantly doing. So we have properties at every age, right? We've had one we've just purchased. We've had ones that we've had for 20, 25 years. We're constantly going through the process of especially now trying to refinance them and put them in the right debt vehicle that matches the cash flows of that asset. As far as a large recap, we have a fairly large portfolio of assets that are currently unencumbered. Depending upon how you measure it, either market value or book value, most of those assets at book value or what we paid for them, it's somewhere close to $2.7 billion on the balance sheet. So there's certainly opportunities today for us to do something with that, lock in our cost of capital for new development, and we're looking at that.

J.T., this looks like one for you about demand. Looking at the strong demand for truck rentals, is there currently higher-than-usual demand from commercial customers who may be dealing with truck and driver shortages? If so, how sustainable is this type of demand?

Our demand on those sets of rentals have been pretty strong really over the last 3 years. We are seeing continued demand from some of the last mile delivery companies that we are working to serve. However, we still -- we're in the do-it-yourself moving business, and we're really committed to those customers. And we have a tremendous number of small businesses from caterers to florists to plumbers, things like that, that we serve on a regular basis. And so I think we're really continuing to try to focus on that. And that sure that answer exactly on that.

But do you have a team on last mile, and I mean you're tracking last mile?

Oh, yes, we're tracking last mile. We're doing a good business with last mile. I wasn't saying that. I just -- we are also still continuing to serve the customers that have built U-Haul companies, so -- but we're working with the last mile delivery companies regularly.

Are commission expenses all related to your dealer network, for example, a percentage of sales or is some commission expense captured by U-Haul's own store network?

Maybe you, Jason. You may answer.

I'll take a shot at that one. So the commission expense that we report in our public financial statements is all related to equipment rental revenues or U-Box rentals. And that's with our independent dealers. So if you were to take that commission expense against the U-Move revenue, I think that roughly ran about 11% last year. If you were to take just a portion of the U-Move revenue that comes from the dealer network, it's going to come really close to our commission schedule, which averages out for trucks and trailers right about 20%.