The RTO Industry

  • To fully understand the demand for Rent-to-Own within the shed industry, and why RTO FINANCE CORP., has such an opportunity to fill this demand, one must look to the rent-to-own (RTO) contract investors related only to the portable shed industry.  Most  RTO contract investors are financed by smaller community banks. This has been problematic due to in-house and/or regulatory capital  restrictions applicable to each individual bank by their board and/or  financial regulators. As RTO contract production grows in any given  state, established community banks are pushed beyond their internal or  external credit capacities and the RTO Investor must approach new  community banks for sources of capital in order to continue operations.  As RTO Investors approach new community banks, the RTO education  curve, lending comfort curve and regulatory insight provide substantial  time delays for credit decisions and credit growth. RTO contracts  between investors and shed producers are non-existent due to historical  industry practice, hence, should an RTO Investor not be able to fund the  purchase of RTO contracts provided by a Shed Producers’ sales efforts,  the Shed Producer must move on to another RTO Investor with the capital  capacity to fund the purchase.  Should this happen, the initial RTO  Investor typically loses all future RTO contract purchases from that Shed Producer.  The shed and mobile storage services industry, has experienced surging  demand in the five years to 2017. The residential market makes up the industry's largest revenue source, estimated at 80.0%, with demand dependent on existing and new traditional and mobile residential sales.  Consequently, improving demand from both residential and commercial construction markets propelled the industry growth during the five years to 2017, with revenue expected to rise at an annualized rate of 3.2% to  $7.4 billion. In 2017, growth is expected to be especially strong as falling oil prices reduce the industry's transportation costs, the  establishment of new dealer lots and increased sales from existing dealer lots increase shed sales, resulting in an industry wide revenue  increase of 6.2%.  The industry has also benefited from the growth of corporate markets.  According to IBISWorld Industry Analyst Dmitry Diment, “Since industry  operators provide furniture and equipment transportation to downstream  commercial clients, as well as document storage, demand for industry  services increases as businesses expand their operations.” Although the office rental vacancy rate, which serves as a proxy for business  activity, continued to rise during the first half of the current five-year period, a turnaround finally occurred in 2012. The office rental vacancy rate is expected to fall from 2012 to 2015 as  corporations expand operations, increasing demand for industry services. “With the economy projected to grow substantially during the next five years,  downstream demand for mobile storage services is projected to  increase,” says Diment. “The industry is also expected to benefit from  an uptick in demand from commercial clients as corporate markets and  retail sales grow.” Although fuel prices are projected to increase, the  industry will benefit from comparatively low oil prices. Since companies  in the industry use trucks to transport storage containers from door to  door, the price of fuel is critical to the success of the industry.