Westport Properties, an Irvine, CA-based owner and operator of self-storage facilities under the US Storage Centers brand, has merged with Vertex Investments, a privately held real estate investment company focused on multifamily investments.
The merged company will operate as two separate verticals, one focused on self-storage development, acquisition and management and the other on multifamily investments.
“We saw some synergies merging with Vertex as it relates to what strengths they bring to the table and what strengths we bring,” said Drew Hoeven, chairman and chief investment officer of Westport Properties.
“They have a multifamily background and operational experience,” he said. “On the flip side, Westport can bring the back office, HR department, IT department and the maintenance service department to allow (Vertex founders) David Grissom and Scott McCormick to focus on the growth of the company and not all the day-to-day nuances.”
Grissom and McCormick will serve as managing partners of Westport Properties’ residential vertical.
Looking to grow in smaller markets
On the self-storage side, Westport Properties has a new partnership in place to focus on expansion into secondary and tertiary markets, Hoeven said.
“We are well-capitalized and have good partners in place to do a lot of deals (in smaller markets) over the course of the next year,” he said, but declined to divulge further details on the partnership.
The company also plans to look for self-storage opportunities in core markets.
US Storage Centers has a presence in 16 states and operates 145 facilities with just shy of 10.5 million square feet of rentable space under management. The company also has five deals in escrow and expected to close within the next couple of weeks.
Over the next year, the merged company plans to look at a variety of deals including new development opportunities and acquisition of stabilized self-storage properties.
Westport will remain largely focused on Southern California as it eyes potential expansion deals although it also plans to look for opportunities mainly in markets where it already has a presence, Hoeven said.
“I think anyone in our business is grateful for the way self-storage is running through the (coronavirus) pandemic,” Hoeven said. “I’m personally still bullish on the outlook for 2021.”
Brian Somoza, managing director of capital markets for JLL, said the self-storage sector is generating a significant amount of interest from investors who are exiting other industries that have felt more pain amid the current pandemic.
“The self-storage sector is experiencing large amounts of capital pivot from other sectors —retail, office and hospitality — which continues to create a competitive landscape,” he said. “Additionally, investors now invested in the self-storage space are continuing to increase allocations and expand their acquisition criteria geographically.”
More M&A in 2021?
Bigger players in self-storage may also be eyeing M&A opportunities in 2021, said Steve Hentschel, a senior managing director and an M&A and corporate advisory leader at JLL.
“REITs owning alternative assets, such as self-storage, manufactured housing, single-family rental, data centers and life science assets, have traded well since the onset of COVID,” Hentschel said.
“Self-storage REITs trade at a premium to the value of their underlying real estate, giving them a useful tool to pursue M&A,” he said.
“Additionally, private self-storage platforms have become more valuable as institutional investors look for ways to diversify into alternative real estate assets and leverage skilled operators to help them acquire and manage,” Hentschel said. “All of these conditions create a good environment for public and private M&A in the sector.