After years of looking for the right entry point, Williamsville, NY-based Sovran Self Storage has struck a deal to buy eight properties in Southern California.
The entry gives Sovran, which operates under the name Uncle Bob’s Self Storage, a toehold in the competitive Los Angeles market where the other three major storage REITs are already established.
“While it has taken us a while to get there, we are thrilled to enter the Los Angeles market,” said CEO Dave Rogers in a statement announcing that the company had recently closed, or put under contract, a total of 30 storage facilities across the country.
The eight California transactions are still under contract, and will cost Sovran a total of $185.6 million. One of the eight facilities is a newly developed facility, which will cost $18.6 million to purchase.
The facilities will give Uncle Bob’s an initial footprint of more than 800,000 square feet of storage space from which to grow its market share in Southern California.
“It’s a big deal,” said Marc Boorstein, principal of real estate services company MJ Partners.
“Now that they have a base there, it is a little bit easier to acquire your next set of assets,” Boorstein said.
Sorry for the wait
Sovran has a strong track record of expanding into new markets, Boorstein said.
“It starts just like they came into Chicago three years ago, they started with nothing,” Boorstein said.
Now Uncle Bob’s has more than a dozen locations in the Chicago area.
Other brokers agree that Sovran’s arrival in California is a very significant moment for the REIT.
“Strategically, it’s a big win for Sovran. Not only does it expand their asset base materially, but it gets them into California, which they have been focused on for a while,” said Kieran O’Shea, managing director of Eastdil Secured.
Brian Somoza, the Los Angeles-based managing director of JLL’s self-storage division, said Sovran has been chasing after just about every offering that has come to market in the state.
“L.A. is very competitive. It is very difficult to enter with just one property and there hasn’t been a ton of transactions out here,” Somoza said, “The opportunity to enter the market with a cluster of properties is pretty rare in California.”
Digging into details
The 30 transactions announced by Sovran total $398 million and span nine states. Five of the announced acquisitions have already closed; those account for $27 million. The remaining 25 transactions, including the California deals, are expected to close by April 2016 for a total of $371 million.
The recent deals consist of five one off transactions, three four-property portfolios and one 13-property portfolio. The properties were spread through several markets: eight in California, six in Boston/SE New Hampshire, five in Central/Southern Florida, three in Dallas, two in Connecticut, two in the New York City metro, two in Philadelphia, one in Denver and one in Phoenix.
Sourcing the sellers
Several industry sources identified Chicago-based Harrison Street Real Estate as the seller of the 13-property portfolio. NGKF’s Aaron Swerdlin, who represented Harrison Street in its 2014 portfolio sale to CubeSmart, declined to comment when reached.
Sources said some of the Los Angeles properties Sovran is buying are from the Harrison Street portfolio. The other Los Angeles properties are being sold by Magellan Storage, which recently marketed for sale a five-facility portfolio in Southern California, according to the same sources.
Included in the offering was the 79,000-square-foot facility at 1727 Buena Vista St in Duarte, CA, which Magellan opened in September after converting the existing building. The previous use was as a storage warehouse for Rose Parade floats.
Representatives of Magellan and its broker Greg Wells of Cushman & Wakefield could not be reached for comment.