On the heels of its $5.9 billion merger with one of its managed funds, W.P. Carey Inc. is mulling the sale of more than three dozen self-storage facilities that are now part of its operating portfolio.
When W.P. Carey absorbed Corporate Property Associates 17 – Global Inc., one of its managed funds, on Oct. 31, it picked up 44 self-storage facilities in the deal. But as it positions itself as a pure-play net lease REIT, W.P. Carey might wind up shedding those assets. Corporate Property Associates 17 – Global, or CPA:17 for short, was a non-traded REIT.
During W.P. Carey’s Nov. 2 earnings call, Brooks Gordon, the REIT’s head of the asset management, said executives are exploring several options for the 44 self-storage facilities, including a possible sale.
“Stay tuned”
“We are comfortable holding those until we have the best option for us. … I would say stay tuned on what we end up doing there,” Gordon told Wall Street analysts.
Toni Sanzone, chief financial officer of New York City, NY-based W.P. Carey, said the 44 self-storage facilities will generate about $26 million of annualized NOI “while we continue to evaluate our various options for those assets.”
W.P. Carey executives noted that the 44 facilities formerly under the CPA:17 umbrella are separate from the 78 net lease self-storage facilities that the REIT already owned. Phoenix, AZ-based U-Haul International Inc. occupies the net lease facilities.
W.P. Carey’s goal in selling the 44 facilities in its operating portfolio would be to concentrate on the nearly 1,200 net lease properties it owns in the U.S. and Europe.
With the CPA:17 merger under its belt, W.P. Carey now “sits among the largest and most prominent REITs,” said Jason Fox, CEO of W.P. Carey. “We have provided investors with long-term growth and stable income for more than four decades and look forward to creating value for all of our shareholders — old and new — over the quarters and years to come.”
Potential bidding war
Marc Boorstein, principal of Chicago, IL-based MJ Partners Real Estate Services, said that if the W.P. Carey portfolio hits the market, a bidding war likely would break out among a number of potential suitors. He said those include Extra Space Storage Inc., National Storage Affiliates Trust, SmartStop Self Storage, The William Warren Group, Metro Self Storage, Harrison Street Real Estate Capital LLC and Merit Hill Capital LP. Liz Schlesinger, founder of Brooklyn, NY-based Merit Hill, is former head of self-storage investments at W.P. Carey.
“Any stabilized portfolio, including the W.P. Carey portfolio, currently generates tremendous interest from both private equity capital firms and several of the public companies, as well as joint ventures,” Boorstein said.
Michael Mele, executive director of the National Self-Storage Group at Marcus & Millichap, said there would be a “ton of interest” in the 44-facility portfolio if W.P. Carey puts it on the market. The facilities, which are scattered across the country, are managed by self-storage REITs CubeSmart and Extra Space, he said.
Mele said the portfolio would especially appeal to a number of private equity firms, hedge funds, family offices and other private investors that want to enter the self-storage sector but don’t want to do small deals to build a portfolio. The W.P. Carey portfolio would enable them to gain an industry foothold “in one fell swoop,” Mele said.
Representatives of W.P. Carey couldn’t be reached for additional comment.
