There was some really huge news in the self-storage industry this week. Real estate investment trusts (REIT) Extra Space Storage Inc. and Life Storage Inc. completed their merger after shareholders for both companies approved it. While the industry has seen plenty of consolidation, particularly in recent years, this one is a biggie. Together, the power duo creates the industry’s largest storage operation, boasting 3,500 locations comprising about 270 million rentable square feet. It’s value? Oh, only about $46 billion. The union also topples fellow REIT Public Storage Inc. from its No. 1 spot, a position it’s held for some time.
A merger of this size is bound to make ripples but it’s too soon to tell what those might be. When news first broke about the acquisition, I interviewed several operators to see what they thought about it and what, if any, changes they might make to their operations and marketing plans. While they had mixed views, all agree that competition in the industry has never been fiercer.
I was also fortunate to gain the perspective from someone on the inside—Extra Space CEO Joseph D. Margolis, who agreed to an interview with ISS. At the company’s helm since 2017, he has been an integral part of Extra Space’s growth and success. Below he offers his insight on this large acquisition and reveals what’s next for these companies.
What was the primary impetus behind the purchase of Life Storage?
The merger should drive long-term value creation for our shareholders. There are significant revenue and expense synergies that we can extract from their portfolio, as well as general and administrative savings. In addition, the larger scale of the combined company will lead to further opportunities such as a possible ratings upgrade, an improved balance sheet, greater diversification in the portfolio, and 50% more data to analyze and use to optimize operations and performance.
Now that the closing of this large acquisition is imminent, what are the next steps?
We are laser-focused on integrating the Life Storage portfolio and people onto the Extra Space platform, extracting the synergies we have identified, and preserving our culture and values that have led to our consistent outperformance. After smoothly integrating the Life Storage portfolio, people and systems, we will turn to the external growth opportunities we believe will be available through this merger.
How will employees for both companies be affected?
While there will certainly be some change for the former Life Storage employees who are joining our team, we have been and will continue to work hard to train and incorporate them into our operations and processes. We also think the larger organization will provide greater opportunities for advancement for our new and existing teammates.
How will the companies operate going forward?
We will retain the excellent Life Storage brand in many instances; but regardless of brand, the stores will be operated in similar manner, focused on providing a clean and safe storage facility and excellent customer service driven by our strong technology platforms.
In what ways will the companies be stronger together?
The combined company will have a stronger balance sheet, expanded industry relationships, a larger management and bridge landing platform, and more data to analyze and use.
Are there plans to rebrand Life Storage facilities as Extra Space? If so, what will this entail?
We will be testing a dual-brand strategy. So, currently, the plan isn’t to rebrand Life Storage facilities.
How do you think this merger will impact the self-storage industry overall?
Consolidation of the storage industry has been underway for several years. Further consolidation, like this merger, increases the operational, resource, data and capital advantages of the larger players at the expense of the smaller operators.
Extra Space will now officially be the world’s largest self-storage operator; but as they say, with great power comes great responsibility. How will this new status as “lead” provider shape the future of the brand?
While size is important and provides many advantages, as I have mentioned, we are focused on continuing to lead the industry in returns to our shareholders and in service to our customers, which is much more important to us than being the “biggest.”