Self-Storage REITs 2011 Overview: Acquisitions Dominate the Market, Expect More of the Same This Year

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By Amy Campbell

New self-storage construction may have come to a standstill, but acquisitions are on fire. After a couple of years of barely-there activity in the self-storage real estate market, 2011 was a banner year for buying and selling properties.   

While there were some modest individual sales, the bulk of buying power belonged to the self-storage real estate investment trusts (REITs). Backed by strong financing, the REITs lit up the acquisition market in 2011.

Extra Space Storage Inc. acquired 55 properties in 17 states for approximately $289.6 million. Twenty-eight of the properties were purchased in the fourth quarter at a price of $189.9 million.

Strategic Storage Trust Inc., a publicly registered non-traded REIT, ended 2011 with an estimated $245 million in new acquisitions. The most recent included 12 properties in Georgia and Florida, totaling approximately 8,000 units and one million square feet for a total aggregate purchase price of approximately $80 million.

The other three publicly traded self-storage REITs—Sovran Self Storage Inc., Public Storage Inc. and CubeSmart—also had their share of acquisitions last year. In late fall, CubeSmart purchased the N.Y.-based Storage Deluxe portfolio, which includes 21 facilities and a site under development, for $560 million.

REITs weren’t the only ones making real estate waves. Another large acquisition belonged to CPA: 17 – Global’s purchase of nine A-American Self Storage facilities. The company, an affiliate of investment firm W. P. Carey & Co. LLC, paid $46 million for the properties, located in California, Illinois and Hawaii.

There are many factors contributing to the sudden influx of real estate activity. In the past 12 months, lending institutions have begun to release their tight grip on funds, enabling those with financial fortitude to move forward.  In addition, many self-storage operators held onto their properties during the slow real estate period between 2009-10, waiting for a more favorable market in which to sell. “2011 represented a market returning to normal. The next several years are likely going to look a lot like 2011,” said Tim Martin, chief financial officer for CubeSmart.

With more than $1 trillion in commercial loans expected to come due in the next three to five years, operators are contemplating their long-term plans. “Many owners will be looking to sell as their facility may be performing fine, but the refinancing scenario may require additional equity investment,” Martin said. In addition, owners with a “variety of capital sources will continue to acquire properties,” he adds.

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