Etude Storage Partners makes offer to buy Global Self Storage

Al Harris
May 9, 2024

Global Self Storage, Inc. a publicly-traded real estate investment trust with a portfolio of 13 self-storage properties, finds itself in the crosshairs of a third unsolicited acquisition proposal from Austin-based Etude Storage Partners LLC. The proposal, amounting to $6.15 per share in cash, marks the latest move in a strategic tug-of-war between the two entities.

Etude’s latest offer follows two prior proposals within the past three months, initially pitched at $5.52 and then revised to $6.05 per share in cash. Despite the increasingly attractive figures, Global Self Storage’s Board of Directors, comprised mainly of independent members, unanimously deemed the previous proposals inadequate. The current proposal would render a total sale price of over $68 million.

Mark C. Winmill, chairman of the board, CEO and president, expressed the board’s stance in their own public announcement, highlighting their commitment to safeguarding the company’s long-term interests.

“After careful review of Etude’s previous unsolicited, non-binding, and conditional acquisition proposals, it was clear to our entire Board that Etude is seeking to opportunistically exploit the challenging macro-economic operating environment currently impacting the valuation of publicly traded self-storage companies and thereby deprive our stockholders of the value currently inherent in the Company as well as the opportunity to benefit from the Company’s significant upside potential as we continue to execute on our strategic business plan,” said Winmill in response to the latest offer.

Global’s owned and managed properties are located in Connecticut, Illinois, Indiana, New York, Ohio, Pennsylvania, South Carolina, and Oklahoma. The company’s total assets stood at about $66.9 million at the close of 2023, according to the company’s year-end earnings report.

Under review

Global Self Storage’s board, in line with its fiduciary responsibilities, said it would assess Etude’s latest proposition to determine the most advantageous course for the company and its shareholders. Notably, the Board emphasizes that Etude’s communication does not constitute a formal offer, urging shareholders to refrain from immediate action.

The storage industry faces challenges due to an oversupply of units and reduced demand. This surplus coincides with falling rental rates and increased abandoned construction projects. Rising costs and operational expenses add pressure, leading operators to lower rates for new customers while increasing rates for existing ones.

Global is no exception to this trend, with Winmill stating in the recent earnings release: “We saw lower move-in rental rates year-over-year across the self-storage industry, but we were able to partially offset decreases in our move-in rates with our proprietary revenue rate management program.”

In 2023, the company generated record annual revenue of $12.19 million, an increase of 2,1% over the previous year. However in the fourth quarter of last year, total revenue declined by 2.7%—brought down mainly by lower move-in rates.

Pushing for a sale

The current offer from Etude Storage Partners was laid out in a letter to Global’s Board of Directors dated May 7. The company is a joint venture between Etude Capital, one of the largest owners of self-storage facilities in the United States, and San Felipe Financing, a private real estate entity controlled by Richard D. Kinder, that invests across the North American self-storage market. The joint venture launched earlier this year and has a $250 million equity commitment from San Felipe Financing. Etude Capital was founded in 2012.

Etude has been a stockholder in Global (NASDAQ:SELF) for the latest five years, and in its letter—signed by Etude President Steven Stein—revealed its intentions to acquire 100% of the outstanding shares of common stock. The $6.15 per share offer represents a 47% premium over the closing price on May 6 of $4.17 per share. The stock rose following Etude’s public bid, closing at $5.33 on Wednesday.

“We believe that our proposal delivers an attractive opportunity for stockholders to obtain full and fair value that exceeds both SELF’s historical share price levels, as well as the value the Company can be expected to deliver to stockholders in the coming years,” wrote Stein in the letter.

Continuing the pitch, Stein wrote that: “performance could be optimized under private ownership by an investor that has the economies of scale required for the Company to build a more long-term oriented business outside of the public markets.” Given our deep experience in the self-storage industry and our financial resources, we possess the speed and execution strength needed to consummate the Transaction in an expedited and efficient manner. Accordingly, we believe a sale of the Company would be the best course to allow stockholders to realize immediate liquidity and maximum value for their shares.

In closing, Etude said it seeks to meet with Global’s board as soon as possible to discuss the matter further, less it take its proposal directly to shareholders.

Al Harris

Alexander Harris is a reporter covering the business of self-storage. He obtained his degree in journalism from Virginia Commonwealth University. He loves reading Elmore Leonard novels and listening to classic country music. You can call him Al.

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