An affiliate of Strategic Storage Trust Inc.—which operates under the SmartStop Self Storage brand—wants to become a publicly traded REIT and raise nearly $1.1 billion in an IPO. The bulk of the IPO proceeds would go toward the purchase of self-storage facilities, primarily in the U.S.
On Sept. 4, Strategic Storage Trust II Inc. filed paperwork with the U.S. Securities and Exchange Commission outlining its plan to sell up to 110 million shares of stock to the public. Strategic Storage Trust II envisions selling 100 million shares priced at $10 each and 10 million shares priced at $9.50 each. An affiliate known as Strategic Storage Advisor II LLC currently owns all of the stock of Strategic Storage Trust II.
If the IPO goes through, Strategic Storage Trust II would join four other self-storage REITs whose stock is publicly traded: Public Storage Inc., Extra Space Storage Inc., Sovran Self Storage Inc. (Uncle Bob’s) and CubeSmart.
In the IPO filing, Strategic Storage Trust II said it would buy, own and operate self-storage facilities in urban, suburban and rural areas. The company said it aims to buy facilities with stabilized occupancy rates of at least 70 percent. All of the acquired facilities would be rebranded under the SmartStop name.
“We will face intense competition in every market in which we purchase self-storage facilities,” Strategic Storage Trust II said in the IPO filing.
Strategic Storage Trust II would be part of an Umbrella Partnership Real Estate Investment Trust, or UPREIT. An UPREIT holds all or most of its properties through an operating partnership in which the REIT owns a controlling stake.
Strategic Storage Trust II was formed this year; it owns no properties and has posted no revenue. Sister company Strategic Storage Trust was founded in 2008. The 5-year-old company is a publicly registered non-traded REIT, meaning its shares are not bought or sold on a stock exchange.
Both companies are based in Ladera Ranch, a suburb in Southern California.
A related entity, Strategic Storage Holdings LLC, is the financial “sponsor” of Strategic Storage Trust and Strategic Storage Trust II. According to VCExperts, “private equity sponsors are increasingly looking at initial public offerings as a liquidity option for their portfolio company investments.”
Strategic Storage Trust owns 113 facilities in 17 states and Canada, with about 72,000 units and 9.5 million rentable square feet. In 2012, it bought 19 facilities at a total cost of about $93 million. The REIT’s biggest markets include Georgia, Texas, South Carolina, Florida and California.
“I want more assets in California,” Michael Schwartz, chairman, president and CEO of Strategic Storage Trust, told the Orange County Register in 2011.
Schwartz also is chairman, president and CEO of Strategic Storage Trust II, the company pursuing the IPO.
The 2013 Self-Storage Almanac ranked Strategic Storage Holdings, the parent of Strategic Storage Trust, as the seventh largest U.S. self-storage operator in 2012, up from the No. 10 spot in 2011.
In the second quarter of 2013, Strategic Storage Trust saw its same-store revenue climb to $17.1 million, up nearly 10 percent from $15.6 million in the second quarter of 2012. Same-store net operating income jumped more than 20 percent–from $8.3 million to $10 million–during the same timeframe. Meanwhile, average same-store occupancy in the second quarter of 2013 stood at 83 percent, up from 77 percent during the same period in 2012.
Strategic Storage Trust posted revenue of $66.6 million in 2012, up 35 percent from $49.4 million in 2011.
On its website, Strategic Storage Trust says it growth opportunities hinge on the notion that “smaller operators cannot afford the marketing and technology to operate in today’s highly competitive marketplace.”