CubeSmart to Acquire Self-Storage Portfolio for $1.69B

It’s another sign that more institutions are beginning to chase yield in self storage.

CubeSmart announced that it has entered into an agreement to acquire 100% of the outstanding partnership units of LAACO, the owner of the Storage West platform, for approximately $1.69 billion. 

The deal includes approximately $40.9 million of LAACO debt that will be repaid at, or shortly after, the closing. Storage West is the owner and operator of 59 self-storage assets in Southern California, Phoenix, Las Vegas and Houston. Two of these properties are owned by two separate joint ventures, each owned 50% by LAACO.

CubeSmart CEO Christopher Marr notes that the portfolio it is acquiring complements the REIT’s existing holdings.  The properties are all in top-40 MSAs that represent key growth markets, he said in prepared remarks. 

The transaction is expected to close in the fourth quarter of 2021, and is subject to customary closing conditions.

It’s the second major self storage transaction this month following Public Storage’s acquisition of All Storage’s portfolio for $1.5 billion.

CubeSmart’s transaction illustrates the strong yield available in this asset class.

“The self storage sector continues to outperform other asset classes due to diverse demand drivers and a business model that achieves impressive cash-on-cash returns, making it an attractive core asset,” Drew Dolan, principal and fund manager of DXD Capital, tells GlobeSt. “As cap rates continue to compress in more traditional commercial real estate investments such as multifamily, we see more institutions beginning to chase yield in self storage.”

The four storage REITs, including CubeSmart, own about 25% of the facilities in the United States.

“With so much fragmentation in the industry, the sector is popping up on the radar with many investors as ripe with opportunity,” Dolan says. “Regional operators such as Storage West are attractive to large buyers looking for scale. 

He also notes that data analytics will increasingly play an important role for self storage investors as the sector continues to gain sophistication

Dolan points to DXD Capital’s $50 million self storage fund, which will develop approximately 12 climate-controlled self storage facilities, using data “to select and develop assets in areas that have supply and demand imbalances today with strong growth fundamentals for the future.”