Hidden U-Haul Billionaire Emerges With Storage Empire

Hidden U-Haul Billionaire Emerges With Storage Empire

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Mark V. Shoen had to endure his father’s suicide, a sister-in-law’s murder and an internecine battle on his way to becoming the largest shareholder of Amerco, the parent of truck rental company U-Haul, North America’s biggest moving and storage business. Becoming a self-storage baron required additional drama, if only in the courtroom. Shoen’s storage empire was the center of a decade-long shareholder suit that splintered his family and left the 62-year-old in control of a business that made him a billionaire.“The sexy stuff is the lawsuits and fistfights in the boardroom,” Sahm Adrangi, chief investment officer at New York-based Kerrisdale Capital Management LLC, said by phone. “But it’s not relevant to U-Haul anymore. This company has had the same core management team for years.”

Demand for trailer and storage-space rentals has increased as the U.S. housing market rebounds, according to Adrangi. Amerco has jumped 75 percent this year, while the U.S. self-storage sector has rallied more than 11 percent, according to data compiled by Bloomberg.

The performance has boosted Shoen’s personal fortune. He owns 3.8 million Amerco shares valued at $845 million, and controls 437 storage facilities, almost all of which were purchased from Amerco with $600 million in company-backed loans, according to a 2011 legal opinion of the Supreme Court of Nevada.

Storage Business

The self-storage businesses had combined sales of about $440 million for the year ended March 31, according to data compiled by Bloomberg, making it the largest self-storage company by revenue after Glendale, California-based Public Storage. (PSA) Shoen has a net worth of $3.6 billion, according to the Bloomberg Billionaires Index, and has never appeared on an international wealth ranking.

Shoen didn’t respond to phone and e-mail requests for comment. Sebastien Reyes, Amerco’s director of investor relations, said the family declined to comment.

“They want people to know how well the company is performing,” he said. “The best way they know how to make that statement is to put their nose to the grindstone and press forward and do what they know how to do well.”

The billionaire started building his self-storage business in 1993, when he bought some storage facilities from Amerco. At the time, he was a director of the company, which was founded by his father, Leonard, in 1945. Today, he is the sole owner of 359 storage facilities, and the majority owner of another 78 which he shares with his brother James, according to Amerco’s 2013 annual report.

Mercury, Galaxy

The properties are held by 32 entities that comprise SAC Holdings, as well as by three holding entities, Galaxy Storage Two LP, Mercury Partners and PM Partners LP, according to Amerco disclosures and Nevada state records.

Amerco manages 24 million square feet of Shoen’s storage properties, most of which operate under the U-Haul brand name. In return, Shoen pays Amerco about $1 a year per square foot, according to the company’s 2013 annual report. In the quarter ended Sept. 30, Amerco reported earnings of $7.06 per share, up from $5.61 a year earlier, due in part to its self-storage business, Amerco Chairman Edward “Joe” Shoen said in a Nov. 7 call with analysts.

“They’ve got a good business model,” said Melvin Holsinger, owner of Tucson, Arizona-based Professional Self Storage Management LLC. “They can set their own pricing, and they are not as price sensitive as smaller operators.”

Family Feud

Amerco’s rally this year elevated its market capitalization to $4.3 billion, a bright spot in what otherwise has been a turbulent 27 years since Leonard Shoen, the company’s founder, lost control of the business to three of his sons.

A World War II veteran, Leonard Shoen saw the opportunity for one-way trailer rentals when he and his wife, Anna Mary, moved from California to Oregon after the war. He founded U-Haul, and later added real estate and insurance divisions under the Amerco name. By 1986, he had given 92 percent of the then-closely held company to his 12 children, according to a 1995 Nevada Supreme Court opinion.

Soon after, Mark Shoen teamed with his brothers James and Joe to gain control of the company in a proxy battle and forced Leonard to retire, according to a citation of Leonard’s deposition in the 1995 Nevada opinion.

The company ended a lifetime consulting contract with its founder in 1989, saying he had tried to conceal his bipolar disorder. The termination led him to get psychological counseling, where he was diagnosed as “situationally depressed,” according to court documents.

‘Personal Demons’

“People have to understand that L.S. Shoen is not a storybook father,” Mark Shoen was quoted as saying in a 1994 Phoenix New Times newspaper article. “He has a lot of personal demons of his own.”

Ousted from the company, Leonard Shoen moved to Las Vegas, where he tried unsuccessfully to open a casino. He committed suicide in 1999 by driving his car into a wooden utility pole, according to an Associated Press report at the time, which cited the findings of the Clark County coroner’s office.

The family fighting grew uglier after Eva Shoen, the wife of Sam Shoen, one of the sons aligned with Leonard in the fight against Mark, James and Joe, was murdered in Telluride, Colorado, in 1990. Before Frank Marquis, a paroled rapist, confessed to the crime, Leonard went on television and accused Mark and Joe of playing a part in Eva’s death.

Defamation Suit

Sam Shoen also attacked Mark and Joe on a Dominick Dunne TV special called “Tragedy in Telluride” that aired after Marquis’s conviction. According to a Colorado Supreme Court opinion from 2012, citing Mark’s testimony, Sam said his brothers “were people whose father gave them everything they ever had. When they got the opportunity they did everything within their power to destroy their father both professionally, financially and every other way and they did it in a completely ruthless fashion.”

Mark Shoen responded to the accusations by filing two defamation suits, one in Arizona against his father and another brother, Michael, and one in Colorado against Sam, Dunne and the show’s producers. The motions were denied, according to the Colorado court opinion, because Mark is a limited public figure and murder is a public concern, meaning the standards for proving defamation are more stringent.

Company Loans

Another Shoen sibling, Paul, filed a lawsuit in 2002 that focused on the deals that created Mark’s self-storage empire. When Mark Shoen began acquiring storage properties from Amerco in 1993, the company treated the assets as off-balance sheet entities, even though it described the self-storage business as central to its operations in its annual report. The business’s sales rose more than 10 percent that year and outperformed the company’s truck and trailer rental division.

In 1994, the company said it didn’t expect to loan Shoen more than $50 million to buy its self-storage facilities. Shoen ended up buying hundreds of additional storage properties from Amerco and borrowed more than $600 million from the company to finance their purchase.

Paul Shoen argued that Amerco had harmed shareholders by selling the self-storage assets for acquisition cost plus capitalized expenses, according to a 2011 Nevada Supreme Court opinion on the case. The case was dropped in 2012 and all related litigation was closed by the court.

Shareholder Alan Kahn, a party to the suit with Paul Shoen, said by phone from San Francisco the terms of the settlement prevented him from discussing the case. In a 2012 press release, Joe Shoen said the settlement ended “nine years and 10 months of baseless harassing litigation.”

Overblown Fears

An e-mail and phone calls to Paul Shoen through his lawyer and his foundation were not returned.

Kerrisdale’s Adrangi said fears of management taking advantage of shareholders are overblown.

“There are some related party transactions, but we haven’t seen any signs of things being done to the detriment of shareholders,” he said. “Other management teams may not do related party transactions, but they award tremendous amounts of options to themselves. You’re just not seeing that at U-Haul.”

To contact the reporter on this story: Brendan Coffey in Boston at bcoffey10@bloomberg.net


About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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