Self-storage REIT National Storage Affiliates Trust plans to fold its biggest participating regional operator, SecurCare Self Storage Inc., into its corporate structure in a merger valued at more than $200 million.

On Feb. 24, Greenwood Village, CO-based National Storage Affiliates Trust said most of SecurCare’s employees will be offered jobs with the REIT, which will continue to run SecurCare’s 216-facility portfolio as it absorbs SecurCare’s property management platform. The deal is expected to close in the second quarter of this year.

“This is a significant milestone representing a major step in the evolution of” National Storage Affiliates, Arlen Nordhagen, the REIT’s executive chairman and former CEO, told Wall Street analysts during the company’s fourth-quarter earnings call Feb. 25.

Inside the deal

As outlined in a filing with the U.S. Securities and Exchange Commission (SEC), owners of privately held SecurCare are set to receive nearly 7.66 million common shares of National Storage Affiliates. About 4.1 million of the common shares are expected to go to Arlen Nordhagen, who is co-founder and majority owner of Lone Tree, CO-based SecurCare. The REIT says Nordhagen did not participate in the merger talks.

According to the SEC filing, built-in gains tied to SecurCare’s partnership units will total about $220 million.

Leadership change

In conjunction with the merger, David Cramer, president and CEO of SecurCare since 2014, is joining National Storage Affiliates as executive vice president and chief operating officer. Cramer will succeed Steve Treadwell in those positions. Treadwell is leaving National Storage Affiliates to pursue another business opportunity.

During the Feb. 25 call, Nordhagen said Treadwell’s departure “is in no way connected” to the SecurCare merger.

A pioneering PRO

SecurCare is the first of National Storage Affiliates’ 10 participating regional operators (PROs) to fully come under the REIT’s corporate umbrella since the REIT was founded in 2013, two years before its IPO.

As National Storage Affiliates explains on its website, a PRO contributes assets on a tax-deferred basis while maintaining control of facility operations. In return, a PRO reduces its cost of capital and trims its operating and marketing expenses. SecurCare is one of the REIT’s three founding PROs.

President and CEO Tamara Fischer said National Storage Affiliates has room for one to three more PROs. As of Dec. 31, the REIT held ownership stakes in and operated 742 facilities in 35 states and Puerto Rico.

Other highlights of the REIT’s fourth-quarter and full-year earnings:

  • About 45 percent of the company’s facilities are being affected by a new competitor within a five-mile radius.
  • Leading markets for same-store revenue growth include Atlanta, GA; Las Vegas, NV; and Riverside-San Bernardino, CA.
  • Lagging markets for same-store revenue growth include Phoenix, AZ; Portland, OR; and Tulsa, OK.
  • After the end of the fourth quarter, National Storage Affiliates purchased 36 facilities for a total of $218 million.
  • In 2019, same-store revenue jumped 4 percent compared with 2018.
  • Same-store NOI went up 5 percent last year versus the previous year.
  • Same-store property operating expenses rose 1.6 percent from 2018 to 2019.
  • The REIT anticipates same-store revenue growth of 2.25 percent to 3.25 percent in 2020, same-store NOI growth of 2 percent to 3 percent and same-store growth in property operating expenses of 3 percent to 4 percent.
John Egan