Christopher Marr, president, chief operating officer and chief investment officer of self-storage real estate investment trust (REIT) CubeSmart, was recently featured in a video interview for the REITWorld 2013 convention in San Francisco. During the discussion, Marr addresses some of the leading drivers of self-storage performance as well as the acquisition environment.
REITWorld 2013 is the annual convention produced by the National Association of Real Estate Investment Trusts (NAREIT), the representative voice for REITs and publicly traded real estate companies. The video can be viewed at REIT.com.
In the interview, Marr points to a lack of new development projects during the last few years as one of the leading drivers of performance among existing self-storage operators. “One of the great things about our business over the past few years is the complete lack of new supply,” he said. “Typically, self-storage new supply is provided by the local real estate entrepreneur. They can manage through the entitlement process, and they have generally produced most of the new product over the last two decades. When you look at where we are in the climate today, they just can’t get financing, and so we’ve seen very little to no new supply—and that’s been great for all of the existing owners and operators of our product.”
While new developments have been slow to recover since the Great Recession, CubeSmart and other large operators have remained active in buying self-storage portfolios to expand their footprint. CubeSmart recently purchased 35 Texas self-storage facilities and one property in North Carolina.
The 36-property portfolio was purchased from Private Mini Storage Inc. for $326.2 million. CubeSmart completed the acquisition through a newly formed joint venture with an affiliate of Heitman LLC for an aggregate purchase price of $315.7 million. Each contributed capital equal to their 50 percent ownership in the venture. One facility in Houston was purchased by CubeSmart for $10.5 million.
“We’re at a stage in the cycle here where cap rates are very attractive to the owner,” Marr said in the interview. “The fundamentals of the business have been quite strong. So, when you have an attractive cap rate and strong fundamentals, folks look at it as an opportune time to sell, and particularly the larger operators in storage have been able to take advantage of that and grow their platform.”
Based in Wayne, Pa., CubeSmart owns or manages 518 self-storage facilities across the United States and operates the CubeSmart Network, which consists of more than 700 additional self-storage facilities.