A Canadian asset management company is poised to acquire an $830 million stake in Orlando, FL-based Simply Self Storage, the eighth largest self-storage operator in the US.
Toronto-based Brookfield Asset Management will acquire the stake via its Brookfield Strategic Real Estate Partners II Fund. Terms of the deal were first made public in a board meeting document of the Orange County Employees Retirement System that was obtained by IPE Real Estate.
Kurt O’Brien, CEO of Simply, told the SpareFoot Storage Beat that the deal was on track to close in the next two to four weeks pending loan assumptions tied to its previous majority investor, Bahamas-based Tavistock Group.
“The investor [Tavistock] in those assets was wanting to exit, and we did not want to sell,” O’Brien told the SpareFoot Storage Beat, “We wanted to maintain the platform and the business.”
Simply owns more than 175 facilities.
Developing 40 properties
O’Brien said the company started looking for a new investor about three months ago, speaking with several potential buyers and advisors before striking a deal with Brookfield.
The deal with Brookfield gives Simply significant funding for growth through both acquisition and development. O’Brien said they plan to develop about 40 properties over the next three years, with the first three to four sites under contract now.
On the acquisition front, O’Brien said the company acquired a 13-property portfolio at the beginning of the year in an off-market deal and is ready for more. Several properties are already under contract, O’Brien said.
“The future equity available from the investor will be determined by the number of opportunities out there,” O’Brien said.
An attractive buy
Marc Boorstein, principal of real estate firm MJ Partners, agreed that Simply is well positioned for future growth.
“Simply turned out to be a very well run company,” Boorstein told the SpareFoot Storage Beat. “We look at their properties very closely and they are consistently exceeding what the REITs have been doing on revenue growth, same-store growth and NOI growth.”
Boorstein said one attractive aspect for Brookfield is that Simply provides an in-place acquisition platform from which to expand.
“Simply has a lot of contacts in the industry and can buy a lot of smaller portfolios and consolidate,” Boorstein said who is arranging a number of Simply’s acquisition deals.
O’Brien founded Simply Self Storage in 2003. An initial investment of $20 million from Tavistock in 2004, helped fuel the company’s initial growth. Entrepeneur.com reported in 2008 that an additional investment of $220 million followed, allowing Simply to grow to more than 225 facilities. The company generated about $150 million in revenue that year.
The company shed many properties during the last recession, but lately has been in expansion mode. In 2014, Simply purchased five facilities in Nashville, TN from A+ Storage for $33.6 million. In 2015, Simply purchased a 12-facility portfolio in Michigan from the Pagoda Companies for $61.3 million as well as several other facilities throughout the year.
One of many
Boorstein said the Brookfield investment is not surprising—its par for the course.
“This is what is happening in every large operator right now. You are having private equity wanting to team up with them,” Boorstein said. “I have definitely seen a lot of it last year that hasn’t been announced.”
Boorstein expects the level of interest to continue into 2016.
“We get a call from a private equity firm literally once a week wanting to invest with a group like Simply Self Storage,” Boorstein added.
This story was updated January 8, 2016.