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Self-Storage REIT Public Storage Buys 43-Property Portfolio from Harrison Street/Morningstar Properties


Self-storage real estate investment trust (REIT) Public Storage Inc. has acquired 43 storage properties from investment management firm Harrison Street Real Estate Capital LLC and operator Morningstar Properties LLC for $315 million. The deal is believed to be the largest self-storage portfolio transaction of the year. The facilities were 82 percent occupied at the time of the sale and comprise more than 2.9 million square feet in 22,500 units across five states: Georgia, North Carolina, South Carolina, Texas and Virginia.

Harrison Street had purchased the properties in separate deals during the last six years and developed them through three of its closed-end opportunity funds: Harrison Street Real Estate Property Funds I, II and III, launched in 2006, 2008 and 2010 respectively, according to the source. The assets were owned in a joint venture with Morningstar and managed under the Morningstar Mini-Storage brand name. The facilities will be rebranded as Public Storage.

“We are extremely pleased with the outcome of this portfolio sale,” said Christopher Merrill, Harrison Street President and CEO. “The strategy of rolling up our sleeves and working to build a portfolio over time proved to be quite successful for our [limited partnerships].”

"This is an extremely gratifying result, especially considering the vintage of when we put this portfolio together and the tough economic conditions in which we were operating for most of the period," added Dave Benson, president and CEO of Morningstar Properties. "Our team worked hard to build this portfolio and increase the value of the assets. Today's outcome validates our effort, as well as how well storage performs relative to the broader economy and as an institutional investment. We could not be more pleased."

In 2013, Harrison Street has acquired more than $2 billion in new investments and sold more than $1 billion in assets, according to the source. The firm focuses on acquiring or developing property in the markets of student housing, senior housing, medical offices and self-storage. Headquartered in Chicago, the company and its affiliates manage approximately $5.5 billion in property assets and publicly traded securities through multiple investment vehicles.

Founded in North Carolina in 1981, Morningstar had owned and operated 66 self-storage facilities in eight states, mostly in the South. The company now has 23 storage properties remaining but is "already back at it, building another portfolio," with five new facilities in development, Benson said. The situation is similar to 2006 when the company sold 60 of its 63 properties to Public Storage.

Based in Glendale, Calif., Public Storage has interests in more than 2,080 self-storage facilities in 38 states with approximately 133 million net rentable square feet. Operating under the Shurgard brand name, the company also has 188 facilities in seven European countries, with approximately 10 million net rentable square feet.


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