Self-storage real estate investment trust CubeSmart has entered an agreement to buy a $560 million portfolio of Storage Deluxe self-storage facilities in the greater New York City area. The company will acquire 21 operating facilities as well as a development site in the Bronx. It will also assume $88 in existing secured debt.
The portfolio contains approximately 1.6 million rentable square feet, including a recently opened 50,000 square foot property in the Bronx, New York. The company considers 13 of the 21 operating assets to be at stabilized physical occupancy, being 87.1 percent occupied as of June 30. This segment of the portfolio has a weighted average date opened of December 2003. The remaining eight assets were 78.3 percent occupied as of June 30, with a weighted average date opened of August 2007.
The portfolio, excluding the Bronx development asset that opened in September 2011, was 84 percent occupied as of June 30. The weighted average population within the three-mile trade ring of the assets is 828,000, and 68 percent of the households are renters (data as of April 14, 2011, provided by STDB Online).
"This transaction accelerates the portfolio transition that management began in 2008, further improving our demographics, margins and rent per square foot,” said Christopher Marr, president and chief investment officer. “Going forward, more than 60 percent of our portfolio net operating income will be derived from our core markets, a 43 percent improvement from January 2008.” Upon completion of this acquisition, the company’s top five markets will be the metro areas of Chicago, Dallas, Miami, New York and Washington, D.C., Marr said.
Under the terms of the contract, there will be two separate closings. The first will consist of 16 unencumbered assets with a purchase price of approximately $357.3 million. It is anticipated to take place during the fourth quarter of 2011. The second closing, with a purchase price of approximately $202.7 million, will consist of six assets encumbered with $88 million of secured debt to be assumed by CubeSmart. This closing will take place immediately following the completion of the loan-assumption process and should occur in the first quarter of 2012. The acquisition is subject to customary closing conditions, including lender consent with respect to the debt that will be assumed.
Eastdil Secured/Wells Fargo Securities served as financial advisor to CubeSmart on the acquisition. In connection with entering into this contract, the company received $300 million of combined preferred and debt-bridge financing commitments from Wells Fargo, which CubeSmart may draw upon to fund a portion of the purchase. Under the terms of this bridge financing, $100 million is in the form of floating-rate unsecured debt, and $200 million is in the form of unregistered preferred securities. Both the debt and preferred securities may be prepaid by CubeSmart at any time without penalty. Additionally, the company has an undrawn $250 million line of credit that may be used to fund the transaction if needed.
CubeSmart owns or manages 456 facilities across the United States and operates the CubeSmart Network, which consists of approximately 838 additional self-storage facilities. The company’s services include storage customization, logistics, moving, organizational and office amenities.