W.P. Carey Buys $86M Self Storage Portfolio

NEW YORK CITY-A non-traded REIT affiliate of W.P. Carey & Co. has acquired a portfolio of self storage facilities for roughly $86 million, from A-American Self Storage. The bulk of the 24 properties--18 in all--are located in California, with five in Illinois and one in Hawaii. W.P. Carey was advised by Reed Smith LLP, led by Ziad Hammodi, a partner in the law firm's New York City office.

The deal comes as new construction of self storage facilities remains low--with fewer than 250 new ones coming on line in the US in 2010, according to data from the Self Storage Association, an industry trade group. Peak development years were 2004 and 2005.

Elizabeth Raun Schlesinger, a W.P. Carey director who worked on the deal, tells GlobeSt.com that a cluster of available facilities is hard to come by, and one of the factors that made the acquisition attractive.

“We’ve been investing in storage for a long time now and typically deals of this size of portfolios don’t trade that often,” Schlesinger says. “It’s tough to gain this type of scale in the industry in one transaction, primarily because of the property type.”

Schlesinger says that W.P. Carey typically sees a lift in net operating income in the self storage facilities it purchases, due in part to the application of its management style. “We believe there are a lot of things we can do to maximize the assets that haven’t been done in the past based upon the way we have managed facilities we’ve brought on to our system,” she says. These properties, she adds, are already well placed, in markets with growing populations and median incomes that support on-time rental payments.

As the economy improves, Schlesinger sees self storage remaining a safe bet. “We started investing in these properties in 2004 and then developed a very focused effort trying to buy one-off facilities and portfolios of facilities in 2006 and the properties that we purchased over that time have performed incredibly well over the recession,” she says. “Not only have they had positive NOI growth despite the negative recession but they continued to do well in an improving economy, so we consider it to be a recession resistant asset class.”

Statistics from the SSA bear this out as well. Overall, according to the group, gross revenues for the industry in 2010 were approximately $22 billion and the association claims self storage as one of the fastest growing sectors of the US commercial real estate industry.