DGM Minerals Corp., a Canada-based mineral exploration company, has signed a definitive agreement to purchase five City Self-Storage properties in the Czech Republic and Poland for €14 million. Finalization of the deal will mark DGM’s entrance into the self-storage industry and include a name change to Less Mess Storage Inc. The transaction is subject to approval by DGM shareholders and the TSX Venture Exchange, a Canadian stock exchange.
All five facilities are controlled by entities owned by Norway-based Selvaag Gruppen A.S. DGM has agreed to purchase the business entities and their storage-property assets. The facilities will be rebranded as Less Mess Storage.
In conjunction with the acquisitions, DGM will consolidate its current issued and outstanding shares on a 10-to-1 basis, company officials said in a press release. The company first announced its intent to buy the properties in November.
Three of the storage facilities are in Prague and two are in Warsaw, Poland. Four of the assets include attached real estate. DGM has identified Central Europe as a strong growth market for self-storage, and officials have said the acquisition will make the company the largest self-storage operator in the region.
"We've spent a lot of time and resources assessing this opportunity for DGM, and we continue to feel that it has outstanding potential. Self-storage is an attractive sector to be in, and this particular opportunity gives us five established self-storage businesses, all purpose-built or renovated specifically for self-storage, and all in central, inner-city locations where real estate values are expected to grow,” said Peter Smith, president and CEO. “We also feel there is a significant growth opportunity for self-storage in Central and Eastern Europe, given that a city like Warsaw, for example, with a population close to that of Toronto, has only two self-storage stores, both of which we will acquire under the transaction."
The two Warsaw properties are in the areas of Krakowska and Torunska. The Krakowska facility is comprised of 25,000 square feet of rentable space in 695 units. It includes retail space and an office. Self-storage is offered on four levels of the building, with two additional floors of rental office space above the storage area. This section has a separate entrance and elevator. The building also has an underground parking garage with 43 spaces. Built in 2006, it is four kilometers from the city center and averaged 93 percent occupancy in 2013.
The three-story Torunska facility is comprised of 30,000 square feet of rentable space in 747 units. It also has a retail area and 12 parking spaces. Built in 2007, it is eight kilometers from downtown and averaged 80 percent occupancy last year.
The three Prague properties are in the communities of Dejvice, Holesovice and Pankrac. Built in 2008, the Dejvice facility is the newest location in the deal. It is comprised of 28,000 square feet of rentable space in 635 units. Self-storage is offered on six floors, with an additional 34 spots for vehicles. The asset averaged 67 percent occupancy in 2013.
The Holesovice facility is on an 85,000-square-foot lot, with 54,000 square feet and 556 units devoted to self-storage. The property includes a three-level main building and a two-floor secondary structure. The buildings were built in 1951 and converted to self-storage in 2002. In addition to storage, the property has retail space and an office area large enough for central staff to run the Czech and Poland operations, company officials said. Just three kilometers from downtown Prague, this facility averaged 80 percent occupancy last year.
The Pankrac facility is a leased property due for renewal in 2022. It is comprised of 25,000 square feet of rentable space in 633 units. Originally a three-story parking garage, it was converted to self-storage in 2002. In addition to storage, it has a retail area and 10 outdoor spaces for vehicles. The asset averaged 87 percent occupancy in 2013.
Total revenue for all five self-storage facilities last year was $4.16 million, showing 20 percent growth during the last three years, company officials said. To finance the acquisitions, DGM intends to raise between $12 million and $15 million in a private-placement financing.
DGM 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.