SALT LAKE CITY-Those who follow @GlobeStcom on Twitter and @GlobeStLIVE may have seen a post teasing the announcement, but GlobeSt.com has learned that Extra Space Storage Inc. has entered into a definitive agreement to acquire a portfolio of 17 self-storage properties located in Virginia. The aggregate purchase price was approximately $200 million, all cash.
This portfolio consists of approximately 1.5 million square feet of net rentable space in approximately 14,000 units. As of Sept. 30, 2013, approximately 90% of the net rentable space at these properties was occupied.
The acquisition of the properties is subject to the completion of due diligence and the satisfaction of other closing conditions. The company intends to consummate the acquisition in or about January 2014; however, there can be no assurances that these conditions will be satisfied or that the acquisition will close on the terms described herein, or at all.
The firm also recently revealed that it will issue and sell 4.5 million shares of its common stock in a public offering. Citigroup is acting as the sole book-running manager for the offering. The company will grant the underwriter a 30-day option to purchase up to an additional 675,000 shares. Extra Space says it will use the net proceeds of the offering to partially fund this particular portfolio acquisition as well as other previously announced acquisitions (which consists of pending acquisitions of five additional properties under contract, with an aggregate purchase price of approximately $50.4 million), to repay the outstanding indebtedness under its secured lines of credit and for other general corporate and working capital purposes.
As GlobeSt.com recently reported, self-storage buildings have continued to spread through the country during the second quarter of 2013, according to a recent report by MJ Partners Real Estate Services. The expansions by many of the leading storage companies continues the stupendous growth self-storage has undergone since the 1970′s. That has many wondering whether institutional investors will eventually give the sector the same attention, and money, allocated to burgeoning sectors like student housing or healthcare real estate.
“Self-storage has been such a proven commodity year-after-year,” says Marc A. Boorstein, a principal of the Chicago-based MJ Partners. But one thing the sector lacks are comprehensive sources of information that will help prospective investors understand the marketplace and make decisions on allocating funds. MJ Partners wants to help change that, and says its “Self Storage Market Overview, Second Quarter 2013,” an analysis of self storage companies’ recent earnings results, “serves as a benchmark of the current investment market, operations performance, capital markets and trends within the self storage industry.”
Last year around this time, Extra Space did a similar move and upped its ownership with a $190-million buy, while, at the same time, issuing and selling 5.2 million shares of its common stock in a public offering.
The company also recently held its earnings call.
Highlights for the three months ended September 30, 2013:
*Achieved funds from operations (“FFO”) of $0.46 per diluted share, including an $0.08 expense related to extinguishment of debt on a portfolio acquisition and a $0.02 benefit related to the modification of existing debt. Excluding these one-time events, FFO was $0.52 per diluted share representing a 20.9% increase compared to the same period in 2012.
*Achieved FFO as adjusted of $0.57 per diluted share, including a $0.02 benefit related to the modification of existing debt. Excluding this one-time event, FFO as adjusted was $0.55 per diluted share.
*Increased same-store revenue and net operating income (“NOI”) by 7.8% and 9.7%, respectively, compared to the same period in 2012.
*Increased same-store occupancy by 170 basis points to 90.6% at September 30, 2013, compared to 88.9% as of September 30, 2012.
*Acquired 22 properties for approximately $214.5 million.
*Paid a quarterly dividend of $0.40 per share.
Spencer F. Kirk, CEO of Extra Space Storage Inc., said during the earnings call that “The self storage industry finds itself in unprecedented times. New supply remains at historical lows, customer demand is stable, and the economy continues to recover. These favorable macro conditions coupled with our advanced technology, marketing and revenue management platforms continue to produce strong operating results and outstanding earnings growth. We continue to see growth in our portfolio, having surpassed 1,000 Extra Space branded properties during the quarter.”
GlobeSt.com will follow up on this story as more information becomes available.