by Alfred Branch Jr.

Photo by Brian Davis

You wouldn't expect to hear the phrase "boring is good" from someone who sails and skis, is married to an architect, is the father of five and owns three golden retrievers. However, for Harvey Lenkin, president and chief operating officer of Public Storage, Inc., business is good when things are a bit boring—meaning everything is going as planned. And for Public Storage it has definitely been smooth sailing as of late. During his tenure, annual revenues have risen steadily to about $800 million. Public Storage has facilities in more than 80 cities in the U.S. and Canada, which combined contain more than 800,000 self-storage spaces. Recently, Lenkin spent some time talking with Portfolio about his company, the industry and playing chauffeur to a good Samaritan golden retriever.

Portfolio: Public Storage has established itself as the largest self-storage REIT. So what does a market leader do from here?

Lenkin: Continuing to do the same things the company has done well for the last 30 years. Namely raising capital in a reasonably efficient manner; building high-quality self-storage facilities in the major metropolitan markets we choose to be in; acquiring high-quality locations in these same markets; and continuing to be innovative in our management. Basically, business as usual [chuckling].

Portfolio That's a good way to put it. Other than strengthening your existing locations, are you looking to move into any new markets? And do you prefer to build new space or acquire an existing company or facility when entering a new market?

Lenkin: We're not seeking to build in new markets, because we're already in the markets where we want to be. But should we choose to add a new market, initially our strategy will be to build new facilities there. However, it would depend on the economics of what is going on. Can we buy existing, high-quality locations at or below replacement costs? That would be the intelligent way to go. We would educate ourselves on that market and what it needed as opposed to what it already had. That would be the major criteria as a potential buyer of assets being presented to us.

Portfolio: Many investors think of the public storage industry as being heavily commoditized. In that environment, what do you try to offer to separate Public Storage from competitors?

Lenkin: We've been in business for 30 years, and during that period we've spent a lot of time and energy strengthening our brand name, to the point that we're the most-recognized name in the industry. We also sought out the best quality real estate locations, and learned how to work with municipal planning and zoning departments in the process, because we didn't want to be placed next to the city dump. Also, I think we've been able to stay on top by concentrating on quality and consistency of service. We've been referred to as having "storage burgers," which is a reference to McDonald's and how we offer the same level of consistency at all our facilities.

But that has not stopped us from being innovative. We were the first company to put in controlled access gates at our facilities, and six years ago we created our national reservations center, which allows customers to call and make reservations from anywhere. Our competitors thought we were crazy, but now they're all copying us, which is nice.

Portfolio: In comparison to the larger real estate sectors, why do you think there are so few publicly traded self-storage real estate companies?

Lenkin: Well, there's soon to be even fewer with Storage USA about to be absorbed by Security Capital and GE Capital, which will remove it from public trading. I think it comes down to other companies not being able to bulk up and accumulate assets. We've been able to acquire funding when needed, but others have not.

Portfolio: There has been a lot of attention focused on the impact—positive or negative—technology has had on various real estate sectors. How has the Internet affected your business?

Lenkin: Nominally. We have a web site [www.public storage.com] and we take reservations for our facilities over the Internet. It's growing, but relative to our telephone reservation system or people coming into our locations to rent space, [online reservations are] nominal at best right now.

Portfolio: Do you see that changing?

Lenkin: Oh, I see it continuing to grow, but I don't see it changing dramatically anytime soon. We continually work on improving our web site. It's very interactive and we've taken a fair amount of reservations on it, but self storage is the type of business where people generally want to visit the location before they rent space.

Portfolio: That may not be a bad thing considering heavy technology initiatives have caused many executives to lose sleep. What aspects of your industry keep you up at night?

Lenkin: Well, nothing really keeps me up at night, but the aspects of this industry that concern me are the same kind of things that most successful companies are concerned about, such as hiring, training and retaining the best qualified people we can. Being a company that has no debt—our balance sheet has virtually no debt—paying back banks is always a concern because we don't want to incur any debt. But ultimately, the most important thing to remember for analyzing our business, from my perspective, is that boring is good. We like boring, no surprises. It means things are going well and cash flow is strong. And I can sleep easily.

Portfolio: Do you invest in other REITs?

Lenkin: Yes, I do.

Portfolio: Which real estate stocks do you currently own?

Lenkin: I'd rather not say. [Laughing] If I disclosed which ones, it might cause their shares to go down.

Portfolio: What are some of your hobbies that help you unwind?

Lenkin: My dogs. I have three golden retrievers named Kitty, Annie and Sammy. I do volunteer work at the local hospital in my community, visiting patients with my oldest dog, Kitty. It's a program called pet-assisted therapy at Huntington Memorial Hospital in Pasadena, CA.

Portfolio: How did you and Kitty get involved in the program?

Lenkin: We first started about five-and-a-half years ago. One of the hospital staff members met my dog at a function and saw that she was friendly and nice, and they suggested we get involved in the program. There are about 25 dogs involved now, and really it's my dog that does the visits. I just drive her there. It's become a major activity of mine to the point that I've become a member of the hospital's board of directors.

Portfolio: Any other hobbies?

Lenkin: I also enjoy skiing. And while I've given up competitive racing, I also like to sail. However, I don't sail as much any more.