Update 10/1/15 – Extra Space Storage has completed its acquisition of SmartStop Self Storage following approval of the deal on Tuesday by SmartStop shareholders, who received $13.75 per share in cash, representing the total purchase price of $1.4 billion. Extra Space paid approximately $1.31 billion, with approximately $90 million coming from the sale of certain assets by SmartStop, according to a press release.
Extra Space claims ownership of 122 SmartStop facilities and has assumed third-party management of 43 other locations. The number of owned facilities acquired by Extra Space increased by one since the two companies agreed to the deal in June.
"We are excited about the merger of these two great companies and the expansion of our national portfolio and operating platform," Kirk said. "The additional scale increases our presence in existing markets and should enhance our ability to source customers online. I want to thank the employees of both companies for their hard work and strong execution on this transaction."
“We are excited that our stockholders have been rewarded for believing in our vision to create a high quality self-storage company that blended the right balance of stabilized properties for cash flow and lease-up opportunities for growth,” added Schwartz, in a released statement.
As previously announced, SmartStop Asset Management LLC was sold to an entity controlled by Schwartz immediately prior to closing and will serve as sponsor to Strategic Storage Trust II and Strategic Storage Growth Trust, both non-traded REITs, according to a SmartStop press release. In connection with this transaction, the SmartStop executive team is now employed by SmartStop Asset Management.
The SmartStop properties acquired by Extra Space will be updated to the REIT’s look and feel, according to a statement posted on a redirected page from the SmartStop website. A transition of SmartStop Web pages to the Extra Space website is also underway. Access to existing facility pages is available through searching by ZIP code, according to the statement. SmartStop facility managers are available to answer customer questions regarding their accounts.
9/30/15 – SmartStop Self Storage shareholders approved the acquisition of SmartStop by Extra Space Storage during a special meeting yesterday. As a result, SmartStop officials expect the deal to close on Oct. 1, subject to closing conditions, according to a press release.
An amendment to the merger agreement was made on July 16, although the structure of the deal remains unchanged. The amendment clarified the merger plan, including how the various entities involved in the structure of the deal will merge assets and, in some cases, dissolve. Ultimately, SmartStop Self Storage Operating Partnership LP will be the “surviving entity and a wholly-owned subsidiary” of Extra Space Storage LP, the release stated.
6/16/15 – Extra Space Storage Inc., a publicly traded self-storage real estate investment trust (REIT) and third-party management firm, has entered an agreement to acquire SmartStop Self Storage Inc., a public, non-traded REIT that also manages storage properties, for $1.4 billion. SmartStop shareholders will receive $13.75 per share in cash, which represents the total purchase price. Extra Space will pay $1.29 billion, with the remaining $120 million coming from the sale of certain assets by SmartStop.
Based in Ladera Ranch, Calif., SmartStop operates a portfolio of 169 self-storage facilities in 21 states and Canada comprising more than 13 million square feet. The deal is expected to close before the end of the year. Upon completion, Extra Space will claim ownership of 121 SmartStop facilities and assume third-party management of 43 other locations, according to a press release.
Prior to closing, SmartStop will sell one facility in California as well as beneficial interests in two locations in Alabama and five in Toronto. The sale price for those assets is included in the per-share price payable to SmartStop stockholders, company officials said. The facilities in Alabama and California will be managed by Extra Space.
Both company boards of directors have approved the transaction, which is still subject to approval by SmartStop shareholders and other customary closing conditions. SmartStop’s board of directors has recommended that its stockholders vote in favor of the deal, officials said.
"We are delighted to announce this acquisition. SmartStop has built a high-quality national portfolio, and these 164 stores will enhance and complement our physical footprint and digital presence," said Spencer Kirk, CEO of Extra Space. "We will be welcoming many SmartStop associates to the Extra Space team, and we look forward to sharing best practices with our new team members."
Among the strategic gains outlined by Extra Space officials is the additional physical and digital scale the REIT will receive in markets where it already has a strong operating presence. Many of the SmartStop properties also “provide opportunities for occupancy and rate increases and other income opportunities,” officials said in a statement.
Extra Space also cited property-management gains as a strategic benefit. Once the deal closes, it will manage assets owned by Strategic Storage Trust II Inc., a public, non-traded REIT specializing in stabilized properties, and Strategic Storage Growth Trust Inc., a public, non-traded REIT focusing on self-storage acquisition and development. SmartStop has served as the sponsor, adviser and property manager for both entities. Upon closing, SmartStop Asset Management LLC will be sold to an entity controlled by SmartStop CEO and chairman H. Michael Schwartz and serve as sponsor to both non-traded REITs, according to SmartStop officials.
“We believe this transaction delivers compelling value to our equity holders and that SmartStop’s properties are an excellent addition to the Extra Space portfolio,” Schwartz said. “We also believe that Extra Space recognizes the tremendous value of our properties, employees and customer base.”
SmartStop was originally called Strategic Storage Trust Inc. when it was formed in 2007. In its eight years, the company raised approximately $568 million of equity capital from investors and made cash distributions at an annual rate equal to 7 percent of investment based on a $10 per share offering price, company officials said. The payout to shareholders, should they approve the deal, will be even higher.
“The $13.75-per-share price represents a premium of approximately 27 percent over SmartStop’s most recently announced net asset value, and assuming the reinvestment of all prior dividends, results in an average annual return on investment in excess of 15.3 percent,” Schwartz said. “SmartStop’s board of directors, with the assistance of legal and financial advisers, thoroughly evaluated potential options to maximize value for our stockholders. We are confident this merger is in the best interests of all stockholders.”
If fully approved, the transaction will be the largest in U.S. self-storage history, eclipsing CubeSmart’s $560 million acquisition in 2011 of 22 Storage Deluxe properties in the greater New York City area.
Headquartered in Salt Lake City, Extra Space currently owns or operates 1,106 self-storage properties in 35 states; Washington, D.C.; and Puerto Rico. The company’s properties comprise approximately 740,000 units and 81.8 million square feet of rentable space. The SmartStop portfolio will boost its footprint to nearly 95 million square feet.