Ladera Ranch-based Strategic Storage Trust Inc. has closed on one of its largest acquisitions to date, an $80 million portfolio buy of self-storage properties in the Southeast.
The company, which buys and develops self-storage properties in the U.S. and Canada, said last week it finalized the purchase of 10 properties near Atlanta and another two in Jacksonville, Fla.
The properties total 7,880 self-storage units and combine for 972,000 square feet of space. The deal works out to a sale price of about $82 per square foot, or $10,000 per unit. Sandy Springs, Ga.-based Homeland Self Storage LLC was the seller of the properties, which were all built between 2006 and 2009.
The deal “will allow us to almost double our presence in the Atlanta market and fuel our ongoing expansion in Florida,” said H. Mich-ael Schwartz, Strategic Storage’s chief executive.
Individual properties that changed hands last week run from a little more than 70,000 square feet to nearly 94,000 square feet. The largest property in the portfolio is an 890-unit complex in Sandy Springs, Ga., that opened two years ago, and sold for $16.5 million
The 12 facilities are being rebranded under the company’s SmartStop Self Storage trade name, according to Strategic Storage.
The deal boosts Strategic Storage’s North American portfolio to about 60,000 self-storage units, which total about 7.5 million square feet. It owns 91 self-storage properties in all.
Those assets are worth about $550 million, Schwartz said.
2 More in Works
Regulatory filings show the company having another two deals in the works as of November that have yet to close, for individual properties in Virginia and Arizona. Those two properties are slated to sell for a combined $14.7 million.
Strategic Storage is a non-traded real estate investment trust that started up operations about three years ago. It’s raised nearly $300 million from investors over that time. The company’s one of roughly 10 national self-storage operators doing most of the buying of larger properties these days.
“Today’s buyers include the storage REITs and those with institutional financial backing, which are chasing the class A properties,” said Stephen Mellon, vice president and national director of the self-storage group for Santa Ana-based brokerage Grubb & Ellis Co.
These self-storage investors “are flush with equity, quite competitive and have a low cost of funds,” Mellon said in a 2012 market forecast released by Grubb & Ellis last week.
Premium Prices
Expect to see premium pricing and favorable financing terms for self-storage portfolio sales of more than $15 million this year, according to Grubb’s forecast.
Private investors also are expected to be aggressive investors, although they could be limited by the debt market, according to the forecast.
Last week’s deal was funded in part through a loan with Cleveland-based KeyBank National Association and proceeds from its fundraising activities, according to Strategic Storage.
KeyBank upped an existing line of credit it provided to Strategic Storage from $30 million to $82 million to help fund the deal, according to regulatory filings.
Credit Line
The credit line can be increased another $68 million to fund additional Strategic Storage deals over the next year-and-a-half, according to regulatory filings.
“From an operational perspective, we have created a solid platform for future growth in 2012,” Schwartz said last week. “This is our time to prosper.”
The Homeland portfolio deal had been in the works since last summer, and was initially expected to sell for $84 million.
When the transaction was initially proposed, Strategic Storage said it planned to bring on a financial partner in the acquisition.
It later opted to forgo partners and make the deal on its own, according to filings with the Securities and Exchange Commission.
