The latest 10-K (annual report) is out from Amerco (UHAUL) and the numbers are pretty stellar.
Total revenue was up for the year ending 3/31/2021 by over 14% to $4.541 billion. Earnings were over $600 million — all total the company generated $1.45 billion in net cash, but of course reinvested $900 million back into the company.
The 10 K is here if interested.
I post this because of my personal interest in the UHAUL Investors Club where I have about $40,000 of IRA money. I have invested here for a few years and have only put new money into the account. Returns are meager–3 years ago they were better, but like all income investments coupons on the bonds have fallen in the last couple of years. Current coupons are 1.75% to 3%.
For folks interested in the UHAUL Investors Club I have some info here.
As of today the note offerings from UHAUL investors club have been ratcheted down another quarter point. The 2 year note is now 1.5%, 5 year @ 2.25% and 7 year @ 2.75%.
This may not be the same entity, but points at least to some risks in this business.
U-Haul Co. of West Virginia said it has filed for bankruptcy after facing challenges in recent years including management turnover, a lack of enough self-storage locations and litigation costs that resulted in declining cash flow and liquidity. The company, which serves do-it-yourself moving and self-storage customers in West Virginia and small parts of Kentucky, Virginia and Ohio, said it filed for chapter 11 protection in the U.S. Bank-ruptcy Court for the Southern District of West Virginia. The company said it is negotiating terms of reorganization plan with U-Haul International Inc., which is expected to give a substantial capital infusion. — Dow Jones Newswires
Just a note to investors here on U-Haul. Generally speaking, I would say the notes on equipment, furniture pads and dollies are not secured debt.
However, when the club first started they did a number of real estate loans, but they have not been available for about a year. These notes were supposed to be secured by a first lien on the properties and then also a corporate guarantee. Personally, I have about $50k secured by their location in Carlisle, PA (Cumberland County) and then $30k another by their location in Gettysburg, PA (Adams County). Considering the loan is being paid down, it is a good investment idea for me with rates of 7.25% on the Carlisle location and 7.75% on Gettysburg, PA. My holdings are in two accounts – personal account and then an IRA. I’ve asked my attorney friend that does title work to see if the liens can be verified, but he is so backed up with work now that it may take him months to verify.
In any event, they are not offering the real estate loans at the present time. However if contacted on SA under my “Early Retirement Advisor” name, I may be able to provide a Blog update – but not sure it would be helpful without the real estate loans not being available now.
Wishing everyone and our veterans the best on this holiday weekend.
A secured real estate loan at 7.25% obviously has tons of risk you aren’t aware of. These direct note programs, where this is not a comparable publicly traded security, are a classic example of adverse selection. The company, along with institutional investors, know that there is a lot of hair on these debts, so instead of going to the market and pay hefty yields, they market it to individuals who are wowed by the high rates. Unfortunately, the rates are not high enough.
Karma – a secured loan on the “Golden Mile” in the Carlisle, PA area has zero to little risk, especially when secured by real estate. Those were the rates back a few years ago. Of course, please feel free to read the most recent quarterly report from Amerco. Personally, I’m cool with the 7.25% rate and take it to the bank on a quarterly basis (they don’t pay monthly).
Have an awesome weekend my friend!
Kaptain Lou, if it’s such a low risk, why are they paying you 7.25%? Why haven’t they refinanced at less than 4%, which would be more reasonable for a low risk loan? Or why aren’t they borrowing at the corporate level, unsecured, at similar rates in the bond market?
A clear cut example of a company taking advantage of investors with direct notes is GWG Holdings. They sell “L Bonds” directly to investors at various maturities, with the average yield in recent years around 7%. However, these L Bonds are subordinated by a credit facility which yields 12-month Libor + 7.5%.
Clearly, if the company was borrowing in the public markets instead of using L Bonds, that unsecured debt would have to yield well above 10%. So if you are buying that at 7% thinking it’s a great deal just because it’s high compared to other issuers, you’ve been tricked. You are actually taking on way more risk than you should to get a 7% yield.
So I suspect the same is happening with UHAUL. When a company is selling large amounts of debt, but decides to do it in the hardest way possible (by selling small quantities to huge numbers of individuals), it’s a real good sign that institutional investors won’t touch it with a ten foot pole.
Uhaul is such an easy alternative investment platform. I currently have about 75 notes with them. Most with 1 to 3 years remaining. As Max said, the quarterly payments are like clockwork. I also like having some investment funds outside of a brokerage account or a bank.
I don’t understand the claim that they “pay like clockwork”. Isn’t it the case that pretty much all issuers not in default “pay like clockwork”?
Well yes let me rephrase they have never missed a payment.
Well, you can always say that right up until a company defaults for the first time!
Paying like clockwork is actually a commonly found phrase in many articles informing investors about the surety of a company, its ability to pay, timeliness of its payment of either debt or dividends, etc. Stating you don’t understand, and then following with your 2nd sentence clearly shows you do understand the meaning as you reference the phrase and answering your own question. Typing on the internet is not like writing ink on the paper as you can go back and change what your wrote after some enlightenment. Posts like these are equated to politics – unnecessary and unneeded.
Mr. Conservative, I probably don’t read the same articles as you. As I pointed out, to say that a bond is paying like clockwork sounds like a made up attribute to imply something is good. But all current paying bonds and preferreds pay like clockwork, until they default. There are thousands upon thousands of issuers over the years that make every interest payment, right up until the day they don’t.
So what really matters is what risk are you taking in these UHaul notes and are you being appropriately compensated for them? The fact that they have not yet defaulted doesn’t answer either of those questions. So go ahead and enlighten everyone here, and me as well, by telling us what an appropriate credit rating would be on these and what the yield would be if it were a bond issue and not this direct note program (hint: the yield bond investors would demand is higher than the direct notes offer, which by my definition means you are not being appropriately compensated).
After all this drama I apologize for even bringing it up and not using the proper terminology.
Max, Dont worry…99% of us understood clearly what you meant.
But is anyone going to acknowledge that the terminology is completely meaningless? I had some Sears bonds that paid like clockwork for many years, and then the clock broke in 2018.
Real estate aside, Uhaul investors club is an alternative investment in essentially unsecured debt. Nothing necessarily wrong with that, but the notes “secured” by old trailers, moving pads, etc. don’t seem to actually have any collateral value backing them or any to collect against that collateral if there is a default.
There was a discussion of that here:
https://innovativeincomeinvestor.com/delving-further-into-uhaul-investors-club/
Private–there is collateral value–the question is what it is worth. Each year they sell $100’s of millions in used equipment (no doubt vehicles etc) so there is some value.
But you are correct one should probably view it is unsecured. That is why I watch their earnings and balance sheet closely.
Private – you are partially correct in regards to the equipment. However, they do have great value in their real estate and many of my notes with them are secured by real estate. This company has been around for many years and almost all of their locations are owned by the parent company.
Yep Max—even with the low rates I am ok having a dab of money there–part of my broadly diversified holdings. This year I have put my $14,000 IRA deposit (2 of us) in eTrade where I can conservatively do better (I hope).
Yep I have some money there and they pay like clockwork. But as Tim said the interest rate has come way down. But they still beat the ..75 %the Feds will give you.I think the 5 year rate now is 2.5%.