Without a doubt, 2013 wound up being an exciting year for the self-storage industry. While the publicly traded REITs dominated the big portfolio deals of the year, many smaller private operators sought to expand their presence.
The Storage Facilitator has zeroed in on seven companies that promise to be particularly active in 2014. These companies stand out for making headlines in 2013, and self-storage observers should watch closely to see whether their success continues.
Strategic Storage Trust Inc.
Headquarters: Ladera Ranch, CA
Non-traded self-storage REIT Strategic Storage Trust took a step closer to going public when an affiliate, Strategic Storage Trust II, filed paperwork to initiate a $1.1 billion IPO. If approved by the U.S. Securities and Exchange Commission, the company would become the fifth publicly traded-self storage REIT in the U.S. Most of the IPO proceeds would finance acquisitions.
Strategic, which operates under the SmartStop Self Storage brand, added 12 facilities in 2013 at a cost of more than $80 million. The acquisitions included a five-property portfolio in the Dallas-Fort Worth area. The company now owns more than 120 facilities in 17 states and Canada.
The REIT’s same-store revenue rose 9.4 percent to $51.8 million during the first nine months of the year compared with the same period in 2012. Same-store net income reached $31 million during the same period, up nearly 19 percent over the same period a year earlier.
In 2014, self-storage professionals would be wise to track Strategic’s acquisition activity and its IPO aspirations.
Amsdell Companies (Compass Self Storage)
The Amsdell Companies, operating as Compass Self Storage, snapped up 11 facilities in 2013. The business now owns 40 facilities in 10 states.
In 2014, you can look for Amsdell to continue stepping up its acquisition and development activities.
“Our success has been in working the markets harder, developing new relationships and maintaining long term relationships,” said Todd Amsdell, the company’s CEO.
Amsdell said his company plans to be aggressive in 2014 in targeting acquisitions, especially those that could use a touch of redevelopment. The company already has four development projects in the works heading into 2014. Two are in the Cleveland area, one is in central Florida and one is in the Dallas area.
“Because of the frothy nature of the acquisition markets, not that we will stop looking, but it does mean we are going to layer in expansion with our development program,” Amsdell said.
William Warren Group Inc. (StorQuest)
Headquarters: Santa Monica, CA
The California-based self-storage operator and third-party management company went bicoastal in April with its acquisition of an 18-property management portfolio in Florida and South Carolina. It also opened a regional office in Tampa, FL.
In November, the company bought one of the managed facilities in Florida for $4.2 million and is switching it to the StorQuest Self Storage brand. According to media reports, Bill Hobin, president and CEO, said the company envisions buying more managed facilities.
Heading into 2014, the company manages more than 80 facilities; it owns more than half of them. Watch this company in 2014 to see whether it will keep growing on the East Coast.
Devon Self Storage Holdings (US) LLC
Headquarters: Emeryville, CA
The self-storage management company bought a 22-property portfolio from CubeSmart LLP in October for $90 million. The portfolio included 10 facilities in the Memphis, TN, area. Along with a handful of third-party management agreements, the CubeSmart deal enabled Devon to nearly double the number of properties under its umbrella.
“If you had asked me this time last year, never in my wildest dreams would I have imagined that this would be happening,” said Ken Nitzberg, chairman and CEO of Devon Self Storage. “It has been a very interesting time, and we have grown rather dramatically.”
As for the CubeSmart portfolio, Nitzberg said Devon was ready to strike when the opportunity presented itself. Devon acquired the portfolio in partnership with a large institutional investor seeking its first foray into self-storage. Devon doesn’t own facilities outright, but operates them as an equity partner on behalf of the ownership group.
“We paid a very reasonable price, in our opinion,” Nitzberg said. “Sometimes REITs sell off pieces in cities they don’t want to be long-term players in, for whatever reason.”
Looking at 2014, Nitzberg suspects the year could mark the company’s return to development.
“We’ve been toying with the idea of getting back into development. When prices get to a certain point, it is more efficient to build than to buy,” Nitzberg said.
Stein Investment Group
2014 will be a year of expansion for the real estate investment firm, with plans to spend up to $50 million on self-storage acquisitions.
Already heavily involved in retail, office and multifamily properties throughout the Southeast, the family-owned company made its first investment in the self-storage industry in 2010. Stein has two open facilities and another two under development.
“We love this business. We think we are good at it, and we would love to have as big of a portfolio as we can—as long as we find deals that make sense to us,” Jeff Stein, principal at Stein Investment Group, recently told The Storage Facilitator.
The company is eyeing markets like Denver, Nashville and Phoenix for expansion opportunities, particularly redevelopment and new development.
National Storage Affiliates
Headquarters: Lone Tree, CO
In June 2013, three of the country’s top self-storage operators joined forces to form a private REIT called National Storage Affiliates.
Northwest Self Storage, Optivest Properties LLC and SecurCare Self Storage Inc. chipped in a combined total of 64 facilities to organize the one-of-a-kind REIT. Each company plans to eventually pool all of its properties into the venture as mortgage debt comes due over the next four years.
When all is said and done, that would amount to 220 facilities, 100,000 units and 12.5 million square feet of rentable space among the three founding companies. If that happens, National Storage Affiliates would be the largest private self-storage operator in the U.S.
However, National Storage Affiliates doesn’t plan to stop there. The partnership wants more operators to join the fold. Tamara Fischer, chief financial officer, told us last summer that the company hoped to recruit seven to nine more affiliates.
According to its website, affiliates that join receive equity in National Storage Affiliates for contributing their properties and reduce their tax loads thanks to the REIT structure. National Storage Affiliates says that if needed, it will provide capital to pay off an affiliate’s debt. Affiliate members continue to operate their own facilities.
Morningstar Properties LLC
Headquarters: Matthews, NC
In one of the biggest self-storage deals of 2013, Morningstar Properties sold 43 properties it owned with joint venture partner Harrison Street Real Estate Capital LLC to Public Storage Inc. The sale price: $315 million. Now, Morningstar has its sights set on bulking up its portfolio again.
While Morningstar gave up a huge chunk of its portfolio in the deal, the company kept 26 Morningstar Mini-Storage locations. The company was an active acquirer itself during 2013, purchasing six properties and putting another seven under contract.
Heading into 2014, the company has $52 million at its disposal to buy facilities, according to the Charlotte Observer. The money is part of the company’s self-managed private equity fund, Blue Doors Storage Fund I, which is backed by regional institutional investors. Morningstar CEO Doug Benson said the cash would cover the acquisition of 20 to 25 facilities.
“We’ve been brash enough to call it Fund I with the idea that there will be a Fund II after that,” Benson said.