Extra Space Storage Inc., a publicly traded self-storage real estate investment trust (REIT) and third-party management firm, has made a $300 million investment in preferred stock of Jernigan Capital Inc. (JCAP), a merchant bank and advisory firm that also owns self-storage facilities. The move was made in connection with the acquisition of JCAP by an affiliate of investment-advisory firm NexPoint Advisors L.P., which closed on Nov. 6, according to a press release.
The investment includes a $200 million tranche that’ll yield 10 percent annually and a $100 million tranche that’ll yield 12 percent annually. After five years, the preferred dividend will increase annually unless it’s retired by JCAP. The investment includes prepayment penalties and make-whole provisions if retired early. In connection with its investment, Extra Space will assume management of 37 JCAP self-storage facilities and gain some purchasing rights to JCAP properties, the release stated.
“Our $300 million preferred-equity investment in the acquisition of Jernigan Capital is another example of innovative capital investment in the storage sector, with attractive returns for our shareholders and an appropriate risk profile,” said Joe Margolis, CEO of Extra Space. “We are excited to add 37 newly built, high-quality storage assets to our platform, and more importantly to begin new relationships with NexPoint and the JCAP management team. We look forward to exploring future opportunities to grow with these partners in the storage sector.”
In February, JCAP acquired its partner interests in several self-storage properties. At the time, it owned 28 self-storage facilities representing 35.2 percent of the net rentable square feet in its investment portfolio, either alone or with its joint-venture partner.
JCAP is a publicly traded REIT listed on the New York Stock Exchange; though now that it’s a subsidiary of NexPoint, it’ll be taken private. The company provides financing to private developers, operators and owners of self-storage facilities, offering funds for acquisition, ground-up construction, major redevelopment or refinancing.
NexPoint is a registered adviser to a suite of funds and investment offerings, including a closed-end fund, a business-development company, an interval fund and various real estate vehicles. It’s part of a multibillion-dollar global platform that specializes in alternative investments.
Headquartered in Salt Lake City, Extra Space owns or operates 1,906 self-storage properties in 40 states; Washington, D.C.; and Puerto Rico. The company’s properties comprise approximately 1.4 million units and 147.5 million square feet of rentable space.