DGM Minerals Corp., a Canada-based mineral exploration company, has signed a letter of intent to purchase five European self-storage properties in the Czech Republic and Poland for 14 million euros. The deal involves the transfer of purchase rights from a real estate investment group led by Guy Pinsent, a former partner in U.K. self-storage operator Personal Storage, and would bring Pinsent and two investment partners on to DGM’s board of directors. Finalization of the deal is subject to several conditions but would mark DGM’s entrance into the self-storage industry. The transaction is subject to review and approval by the TSX Venture Exchange, a Canadian stock exchange.
Pinsent secured the rights to purchase the properties last month but has agreed to transfer the rights over to DGM. Three of the facilities are in Prague, and two are in Warsaw, Poland. Four of the assets include attached real estate, according to a DGM press release. The company has identified central Europe as a region “poised for enormous short- and long-term growth in the self-storage sector,” and officials said the acquisition will make DGM the largest operator in the region.
Under the conditional terms of the non-binding letter of intent, DGM must complete a stock consolidation at a ratio to be determined prior to the execution of the definitive agreement, as well as raise at least $15 million in equity financing. The company will also undergo a name change.
As consideration for obtaining the option to purchase the self-storage properties and other assets, including intellectual property, developed by Pinsent, the deal would also include the issuance of approximately 20 percent of DGM common shares “post-consolidation and post-financing” to Pinsent's group, which also includes investors Roger Orf and William Palmer. Peter Smith, DGM’s president and CEO, is also a minority partner in Pinsent's group. Pinsent, Palmer and Orf are expected to join DGM's board after the deal closes.
"We've been looking for an opportunity for DGM over the past few months and management feels that this potential transaction has outstanding potential, both because of the growth opportunity for self-storage in central and eastern Europe and due to the very high quality and relevant experience of the proposed additions to the board and management on consummation of the deal,” Smith said. “However, there is a lot of work to be done between now, signing of a definitive agreement and the closing of the transaction.”
Pinsent, Palmer and Orf will bring European business and real estate development experience to DGM, including knowledge of self-storage operation. Pinsent is an entrepreneur with a background in investment banking, real estate and development. Following his partnership with Personal Storage in the United Kingdom, he has focused on self-storage opportunities in Poland and neighboring markets.
Palmer is an entrepreneur and real estate professional who was an early developer in the European self-storage sector, according to DGM officials. Palmer founded European operator Access Self Storage, which sold in 1998 to a $1.5 billion European fund sponsored by Security Capital. Palmer stayed on as CEO until 2000. At the time of his departure, Access operated 65 locations in France, Germany and the U.K., comprising 3.5 million square feet of storage space.
Orf is a partner with Apollo Global Management LLC, a firm specializing in alternative asset management and capital investing. Orf leads the company’s real estate business in Europe and has been an active investor in Central and Eastern Europe, including Poland. Prior to joining Apollo in 2010, Orf spent most of his career investing in European real estate markets, including working on behalf of Citigroup, Goldman Sachs and Lone Star.
DGM Minerals Corp. is based in Vancouver, British Columbia, Canada. As a mineral exploration company, it has focused on the acquisition and exploration of mineral projects in Canada. It has its common shares listed on the TSX Venture Exchange.