Look for publicly traded REIT W.P. Carey Inc. to be on the prowl for self-storage acquisition targets in 2014, just as it was in 2013.
“We certainly would like to match our buying from last year,” said Liz Raun Schlesinger, an executive director at W.P. Carey. “It is just a matter of finding the right deals that work for us at our target purchase price.”
Last year, W.P. Carey found $121 million in self-storage deals. Of those, $89.2 million went toward the acquisition of a five-facility portfolio in New York City. The remainder went toward the purchase of eight facilities in four states.
Self-storage represented a small share of W.P. Carey’s total investment volume of $1.8 billion in 2013, taking a back seat to office, retail, manufacturing and R&D. However, W.P. Carey is a big player within the self-storage sector as owner of more than 150 U.S. facilities. Most of the REIT’s facilities are managed by two self-storage REITs, CubeSmart LP and Extra Space Storage Inc.
While other assets take up a greater share of W.P. Carey’s investment activity, self-storage is a key component of its various real estate funds.
“We’ve had another incredibly strong year from a same-store revenue and net-operating-income growth perspective,” Schlesinger said. “We’ve seen significant gains every year since we started investing in self-storage in 2006.”
Big Deal in the Big Apple
W.P. Carey’s 2013 storage acquisitions were financed through a $4.5 billion fund that’s made up mostly of commercial properties leased by tenants like the New York Times Co., McKesson Corp. and Harbor Freight Tools.
According to U.S. Securities and Exchange Commission filings and city property records, W.P. Carey bought four New York City facilities from Madison Self Storage LLC in June. The entity is controlled by self-storage investment group TVG Partners and a private equity fund called the City Investment Fund LP. The fifth Madison-owned facility in New York City was acquired in November.
The New York City portfolio covers more than 430,000 square feet at these five facilities:
- 1725 West Farms Road in the Bronx.
- 1037 Zerega Ave. in the Bronx.
- 4268 Third Ave. in the Bronx.
- 1205 Flatlands Ave. in Brooklyn.
- 1060 Wyckoff Ave. in Queens.
Schlesinger said she couldn’t discuss the New York City deal.
The facilities have operated under the Secure Self Storage brand, which is used by TVG Partners’ property management division. The Secure Self Storage management and branding appear to still be in place. Aside from New York, the company operates facilities in Massachusetts, Delaware and Washington, DC.
New York City-based W.P. Carey spent $31.8 million to buy eight other facilities throughout 2013 in seven separate deals. The REIT added four facilities in Florida, two in Georgia and one each in California and Hawaii.
Schlesinger said W.P. Carey is about to close on the purchase of two more facilities in Florida.
Schlesinger said W.P. Carey shopped for a lot of facilities in 2013, but acquisition activity was curbed, in large part, by stiff competition.
“We looked at almost a billion dollars worth of assets last year and were only able to close on $120 million of those,” Schlesinger said. “It takes a lot of looking to find assets that work well for our portfolio.”
Among assets that W.P. Carey chased but did not walk away with was the 43-facility Morningstar Mini-Storage portfolio, which ultimately went to Public Storage Inc. for $315 million.
“While we continue to review and selectively bid on those type of large portfolios, for the most part we are outbid,” Schlesinger said.
That’s because the self-storage REITs have been more willing to pay a premium for large portfolios. W.P. Carey benefited from that in December, when it sold a 20-property portfolio it owned jointly with Harbert Management Corp. to Extra Space for $200 million. Schlesinger said W.P. Carey can afford to be more competitive when pursuing smaller portfolios and one-off deals.
“It has become very competitive to find good opportunities,” Schlesinger said, “but we are opportunistically looking.”