While other self-storage REITs have been relatively quiet this year on the acquisition front, National Storage Affiliates Trust has been making plenty of noise. This year, the REIT expects to spend as much as $600 million on acquisitions.
“At this time, we believe current market conditions have created opportunities on the acquisition side as seller expectations have rationalized,” Arlen Nordhagen, chairman and CEO of the Greenwood Village, CO-based REIT, told Wall Street analysts May 3. “Having started the year with a strong pace of acquisitions, we continue to maintain an attractive pipeline of opportunities.”
During the first quarter of 2018, the Greenwood Village, CO-based REIT spent $135.8 million to buy 25 wholly owned facilities. In addition, National Storage Affiliates chipped in $2.4 million for the purchase of a joint venture property. Those 25 facilities — mostly in Arizona, Florida, Kansas and Texas — feature about 12,000 units in 1.4 million rentable square feet.
Nordhagen said that activity represented a record-setting level of first-quarter acquisitions for the REIT.
By comparison, Glendale, CA-based Public Storage, the country’s biggest self-storage REIT, bought 22 facilities in all four quarters of 2017 at a cost of $149.8 million.
Growing the portfolio
This year, National Storage Affiliates is forecasting $250 million to $400 million in wholly owned acquisitions and $50 million to $100 million in joint venture acquisitions. All told, the entire sum could be $600 million.
In 2017, National Storage Affiliates added 65 wholly owned facilities and five joint venture properties to its portfolio at a cost of more than $427 million. As of March 31, the REIT’s portfolio consisted of 468 facilities totaling about 28.5 million rentable square feet.
“It’s still a seller’s market”
Nordhagen said his REIT is competing with a lot of institutionally backed private buyers for self-storage assets that are on the market. However, he noted that nearly all of the REIT’s first-quarter acquisitions were made in off-market deals.
One potential source of off-market acquisitions is the REIT’s pipeline of over 100 facilities managed by regional operators that are part of its network. Nordhagen said the properties in this “captive pipeline” are valued at more than $900 million.
“It’s certainly not a buyer’s market out there. It’s still a seller’s market,” he observed.
Other notes from the first quarter include:
- Same-store revenue rose 4.2 percent compared with the same period in 2017.
- Same-store NOI grew 4.4 percent compared with the same period in 2017.
- Average same-store occupancy slipped to 88.1 percent, compared with 88.5 percent in the year-ago period.
- Supply growth exceeded demand growth in the Dallas, TX; Oklahoma City, OK; Portland, OR; and Raleigh, NC, markets.