In the largest U.S. self-storage portfolio acquisition of 2013 and the second-largest ever, self-storage REIT Public Storage Inc. has purchased all 44 of Stor-All Storage’s existing facilities for $430 million, The Storage Facilitator has learned exclusively.
Stor-All CEO Jeff Anderson confirmed the deal closed Dec. 12. The 44 facilities encompass 2.7 million square feet and more than 26,300 units. The properties are in five states.
“It was a big decision, but we think the timing was right as far as the interest rate environment and what is going to happen with cap rates and tax rates going forward,” Anderson told The Storage Facilitator.
The portfolio comprises 26 facilities in Florida (mostly South Florida), seven in Georgia, six in Virginia, four in Colorado and one in North Carolina. Stor-All had just acquired its latest facility in July.
Multitude of Mega-Deals
Before the Stor-All deal, the largest U.S. self-storage portfolio deal of 2013 involved 36 self-storage facilities purchased for $326.2 million by self-storage REIT CubeSmart LP and joint venture partner Heitman LLC. The sellers were Private Mini Storage and Clarion Partners LLC.
The largest self-storage portfolio deal ever in the U.S. was CubeSmart’s $560 million acquisition of Storage Deluxe in 2011.
It’s hard to refuse offers by these large conglomerates.
– Jeanine Blake, broker at Prudential Commercial Real Estate
Aaron Swerdlin, executive managing director of the Self Storage Group at NGKF Capital Markets, said more self-storage portfolio deals totaling at least $100 million each have been done in 2013 than in the past five years combined. Therefore, he doesn’t foresee the same pace of mega-deals happening in 2014.
“However, I do think large transactions will continue to be the focus,” Swerdlin said. “Unless it’s a one-off asset in an urban or core market, the most aggressive capital is focused on portfolios.”
Michael Mele, senior director of Marcus & Millichap’s National Self-Storage Group, said it’s a good time for independent operators like Stor-All to sell.
“It’s a seller’s market, no doubt about it. Cap rates are extremely low, if not at a record low, and we will most likely will see interest rates rise,” Mele said. “It is hard to time the top of the market, but you’ve got to believe we are right around it.”
The Future of Stor-All
Stor-All has a long history in the self-storage industry, beginning when brothers Norman and Robert Anderson of Anderson Construction founded Stor-All in 1967. Stor-All is a founding member of the Self Storage Association. The founders’ sons, Jeff and Larry, run the business today.
Jeff Anderson said his Deerfield Beach, FL-based company now is focusing on rebuilding its portfolio.
Stor-All has one property under development in Vinings, GA, that is set to open next summer. Anderson said the company has another property under contract.
Going forward, Anderson expects the company to concentrate on development of new facilities, rather than on acquisition of existing facilities. Markets where the company already has operated will be targeted. Anderson also said the company may chip in equity for other self-storage operators.
Public Storage “bought our properties, but they didn’t pay for our knowledge,” Anderson said. “We are keeping our core staff together and looking forward to the future.”
The transition from Stor-All to Public Storage already has taken place, with temporary signage installed at the 44 locations. The facilities now are listed on the Public Storage website.
In its third-quarter financial report, Public Storage said it planned to buy 88 facilities by year’s end for a combined total of $754 million. In November, the company closed on a 43-property portfolio sold jointly by Harrison Street Real Estate Capital LLC and Morningstar Properties LLC for $326 million.
A spokesman for Glendale, CA-based Public Storage, the country’s largest self-storage REIT, couldn’t be reached for comment.
Richard Klinger, a self-storage broker with NAI Tampa Bay in Florida, said the size of the Stor-All deal could affect Florida’s self-storage real estate market. High-dollar deals raise the expectations of all sellers, making it harder for smaller self-storage operators to buy facilities, he said.
Jeanine Blake, a broker with Prudential Commercial Real Estate in Tampa, said companies like Public Storage have the power to outbid everyone else when it comes to self-storage portfolios.
“It’s hard to refuse offers by these large conglomerates. They can buy properties at a higher dollar than would a smaller operator,” Blake said.
Marcus & Millichap’s Mele, who is based in Tampa, expects Public Storage and the other self-storage REITs to remain aggressive on the acquisition front heading into 2014.
“They’ve got plenty of money and ambition to spend it, and the cost of capital is extremely low. I don’t see anything to slow them down over the next year,” Mele said.
One limitation, particularly in Florida, will be the scarcity of available facility portfolios.
“You start to run into a problem of what’s left to buy,” Mele said. “That will be interesting to see.”
John Egan contributed information for this story.