In September, self-storage REIT National Storage Affiliates Trust expects to complete its $1.325 billion purchase (with joint venture partner Heitman LLC) of 112 Simply Self Storage facilities. Yet closing that deal won’t mean the end of near-term acquisition activity for National Storage Affiliates — not by a long shot.
In a Aug. 7 call with Wall Street analysts to discuss second-quarter earnings, CEO Arlen Nordhagen said National Storage Affiliates still has about 120 facilities in its “captive” acquisition pipeline, with a total value around $1 billion. Furthermore, he said, the pipeline of potential acquisitions from its network of private operators remains “strong.”
Aside from the Simply Self Storage deal, “our other avenues for external growth remain active as we continue to capitalize on our position as a strategic consolidator within the highly fragmented self-storage business,” Nordhagen said.
Closing the deal
For now, Nordhagen and his team are focused primarily on the Simply Self Storage acquisition.
In July, Greenwood Village, CO-based National Storage Affiliates said it was teaming up with Heitman to buy an 8.7 million-square-foot, 68,000-unit portfolio that spans 17 states and Puerto Rico. The seller is a private real estate fund managed by Toronto-based Brookfield Asset Management Inc.
Nordhagen said seven of the 112 Simply Self Storage facilities — six in Puerto Rico and one in Ohio — will be spun off to National Storage Affiliates as wholly owned properties right after the deal closes. The REIT will consider selling the Puerto Rico properties, he said.
Most of the 105 facilities remaining in the joint-venture portfolio will be rebranded under the iStorage name, Nordhagen said.
Heitman, a Chicago, IL-based real estate investment firm, is a 75 percent equity partner in the Simply Self Storage acquisition, with National Storage Affiliates at 25 percent, according to Nordhagen.
Half of the purchase will be paid for with debt from two life insurance companies, he said. Those lenders are contributing about $643 million in 10-year, interest-only secured debt financing at a rate of 4.34 percent.
In other highlights from the second-quarter earnings call, National Storage Affiliates reported:
- Same-store NOI growth of 4.2 percent compared with the same period in 2017.
- Same-store revenue growth of 3.6 percent compared with the same period in 2017.
- Growth in same-store operating expenses of 2.4 percent compared with the same period in 2017.
- 12 wholly owned acquisitions totaling $62.9 million.
- New-supply exposure affecting about 20 percent of its portfolio, with the Portland, OR, market taking an especially big hit. Oregon makes up nearly 15 percent of the REIT’s same-store pool.
- An expected peak in late 2018 of new-supply growth across the REIT’s markets.
