National Storage Affiliates Trust is poised to turn the Big Four into the Big Five.

The Greenwood Village, CO-based company is launching an IPO of 20 million common shares, a move that will make the company the fifth publicly traded self-storage REIT in the U.S.

Shares of the REIT will trade on the New York Stock Exchange under the symbol NSA, joining the likes of Public Storage, Extra Space Storage, Sovran Self Storage (Uncle Bob’s) and CubeSmart.

National Storage Affiliates is a conglomeration of self-storage operators that contributed their own facilities to form the REIT in 2013.

IPO terms

At an initial offering price of $15 and $17 a share, National Storage Affiliates expects to raise up to $336.9 million. This figure assumes the underwriters will exercise their options to purchase up to 3 million shares. National Storage Affiliates plans to use the proceeds to fund acquisitions, reduce debt and as working capital.

The current IPO aims much higher than the company’s initial IPO filing with the U.S. Securities Exchange Commission in February. That IPO targeted fundraising of $100 million.

Jeffries, Morgan Stanley and Wells Fargo Securities are underwriting the IPO.

investment outlook
Real estate advisor Marc Boorstein said that investor interest in the self-storage sector is very high.

Primed for investment

Marc Boorstein, principal of Chicago, IL-based MJ Partners, a real estate advisory firm, said the National Storage Affiliates IPO comes as investor interest in the sector is strong.

“The self-storage industry is performing very well with little headwinds to come,” Boorstein said. “A lot of retail investors will buy this stock.”

One of the most attractive aspects of National Storage Affiliates is that its entire portfolio is made up of cash-flowing facilities, which don’t carry the lease-up risk of newly developed facilities. The fact that National Storage Affiliates comprises operators with 30 years of industry experience bodes well for its future.

“It is a good play, with very little risk. How much upside is in it? Who the heck knows?” Boorstein said.

National Storage Affiliates says it plans to boost the occupancy of its current portfolio from 85 percent to 90 percent. Considering that new self-storage development is barely keeping up with population growth, Boorstein said chances are good that the company will reach that goal before too long.

Joining forces

Three operators founded National Storage Affiliates: SecurCare Self Storage, Northwest Self Storage and Optivest Properties. Arlen Nordhagen, co-founder of SecurCare, is CEO of National Storage Affiliates. SecurCare has contributed the largest number of properties to the conglomerate, 116.

Guardian Storage and Move IT Self Storage joined the REIT in 2014. Storage Solutions is set join once the IPO is completed.

Together, the operators are able to secure capital at a lower cost than they could on their own. Combining forces also makes the operators competitive with larger operators in acquiring facilities and attracting investors.

National Storage Affiliates current and and future holdings.

Portfolio growth

All told, the National Storage Affiliates portfolio contains 246 facilities in 16 states. The portfolio totals 13.7 million square feet of rentable space and more than 100,000 units.

The portfolio includes 21 facilities that National Storage Affiliates plans to buy in conjunction with the IPO. The company expects to use $42 million from the offering to finance the purchase of those facilities, which are owned or managed by the regional operators that make up the REIT.

National Storage Affiliates has identified another 114 facilities it plans to purchase over the next four to five years. Those facilities are managed by one of the participating operators.

The REIT is the sixth largest self-storage operator by size, according to Inside Self-Storage.

Sector shake-up

MJ Partners’ Boorstein said the IPO is sure to bring some dynamic changes to the self-storage sector.

“It just took six operators off the market that can never be acquired by the REITs,” Boorstein said.

It also creates an option for independent self-storage operators to consider instead of selling to one of the existing public REITs or another acquirer. National Storage Affiliates seeks to bring more operators under its umbrella by offering stakes in the company in exchange for facilities.

Boorstein is representing one such operator in Louisiana that has a deal pending to put its five facilities into the National Storage Affiliates mix rather than pursuing a sale with a conventional buyer and cashing out. The client likes the prospect of having cash flow without having to manage the facilities, Boorstein said.

“They want to be part of an IPO when they look and see how well [National Storage Affiliates’] properties are doing,” Boorstein said.

Alexander Harris