Sovran Self Storage is on an acquisition spree in 2014. During the first half of this year, the self-storage REIT spent more than $225 million to purchase 26 facilities — beating its acquisition spending totals for 2012 and 2013.
In the second quarter of this year alone, Sovran forked over $130 million to purchase 19 facilities. That’s on top of the more than $95 million it spent to purchase seven facilities in the first quarter of 2014.
By comparison, Sovran bought 11 facilities for $94.9 million in 2013, and 28 facilities for $189 million the year before.
“I wouldn’t be surprised to see more acquisitions from them during the rest of the year,” said Gaurav Mehta, vice president of the REIT equity research division at New York City investment bank Cantor Fitzgerald. “In general, consolidation will continue in the industry.”
Mehta said owners continue to market their facilities because cap rates, which are hovering around 6.5 percent to 8 percent, remain attractive.
“Self-storage industry transaction volume in 2014 may not be as much as we saw in 2013, but will still be very strong,” Mehta said.
In the hopper
During a May 1 conference call with Wall Street analysts, CEO Dave Rogers said Sovran had “quite a bit in the hopper” in terms of acquisitions, with $120 million in deals under contract and more deals under consideration. Roger said the landscape for self-storage deals is “very competitive,” as buyers are willing to pay a premium “for anything resembling a decent store in a decent market.”
In general, consolidation will continue in the industry.
— REIT analyst Gaurav Mehta
Sovran’s second-quarter purchase of 19 storage facilities in several separate deals pushed its facility count over the 500 mark. The second-quarter deals expanded Sovran’s footprint by more than 1.3 million square feet. Sovran operates its facilities under the Uncle Bob’s Self Storage brand.
“This is a terrific group of stores. They fit our strategy of acquiring good properties in quality markets in which we can apply our marketing and management platforms to add significant value,” Rogers said in a news release.
Let’s make a deal
The biggest transaction during the second quarter of this year was the purchase of seven facilities in the St. Louis area from Storage Banc for $35 million. That portfolio covers about 400,000 square feet.
Among the 19 facilities, Sovran HHF Storage Holdings LLC bought three of them. Sovran owns a 20 percent stake in the joint venture, and real estate investment manager Heitman LLC owns the rest.
Sovran also acquired two portfolios on the East Coast.
One of the portfolios consisted of the remaining properties owned by Lackland Self Storage. Lackland sold 19 facilities in New Jersey and Pennsylvania to Sovran in 2011 for $74.6 million. Sovran bought those facilities through the joint venture with Heitman.
Sovran returned this year and bought the remaining Lackland locations. One of facilities is in King of Prussia, PA, and the four other facilities are in the New Jersey communities of Wayne, Hamilton Township, Jamesburg and Monmouth Junction.
Sovran bought three more facilities in New Jersey in a separate deal with Treasure Island Storage. Those facilities are in Asbury Park, Farmingdale and Lakewood.
Sovran purchased the remaining four facilities in one-off transactions:
- An 85,200-square-foot facility at 1601 S. Ashland Drive in Chicago for $5.47 million.
- A Quantum Self Storage facility in San Antonio.
- An Acorn Self Storage facility in Fishkill, NY (pictured at top).
- A Storage Xxtra facility in Peachtree City, GA.
Purchase prices for the San Antonio, Fishkill and Peachtree City facilities weren’t available.