Public Storage, which touts itself as one of the largest U.S. owners of self-storage facilities, is getting even bigger with a proposed multibillion-dollar acquisition of one of its rivals on the heels of unveiling plans to relocate its headquarters to Texas.
The real estate investment trust has agreed to acquire Greenwood Village, Colorado-based National Storage Affiliates in an all-stock deal with an enterprise value of about $10.5 billion, Public Storage executives said Monday. The deal would add National Storage's portfolio of more than 1,000 properties, 69 million square feet and 550,000 units across 37 states and Puerto Rico.
Once the deal closes, the combined entity will operate nearly 4,600 properties across 42 states, representing a 30% increase in Public Storage's total properties, executives said during a call with investors.
"Their portfolio is complementary to ours, expanding into high-growth Sun Belt markets and new geographies where we see long-term demand," Public Storage's incoming CEO Tom Boyle, who is currently serving as the REIT's chief financial and investment officer, told investors during the call. "Over the last several years, our team has toured almost all of these assets, and we're excited about the opportunity to bring them into our portfolio."
The combined company is expected to have a market capitalization of about $57 billion and a total enterprise value of about $77 billion, officials said. Each board of trustees at the companies unanimously approved the deal, which, subject to closing conditions, is expected to close in the third quarter.
The deal is one of the largest for the self-storage sector in the past few years during a volatile time for the industry. Demand and rents for self-storage properties increased significantly during the pandemic but then declined as interest rates rose and housing market activity, a key driver of storage demand, fell to the lowest levels on record, according to a recent CBRE research report.
In 2023, Public Storage tried to buy Life Storage but was outbid by Extra Space Storage, which paid $12.7 billion. That same year, Public Storage bought Simply Self Storage from a unit of private-equity giant Blackstone Group for $2.2 billion.
Public Storage's new strategy
The deal comes as Public Storage launches its so-called strategic vision to accelerate growth under new leadership and an operating platform. Public Storage announced the vision in mid-February when it also revealed plans to move its headquarters from Glendale, California, to Frisco, Texas, a northern suburb of Dallas.
Public Storage said it picked the Frisco office building totaling more than 120,000 square feet because of the market's "depth of talent and innovation," but still planned to maintain a long-term presence in Glendale.
By applying Public Storage's new operating model to National Storage's portfolio, "we see meaningful opportunity to enhance the customer experience, drive financial upside, and create significant value for shareholders over the near and long term as our industry emerges from the bottom of the self-storage operating cycle," Boyle said in a Monday press release.
Part of Public Storage's strategy is to boost National Storage's occupancy of its self-storage properties, with Public Storage having average occupancy of 92% compared with National Storage's 84%, executives told investors during Monday's call.
Once the deal closes, Public Storage also plans to invest around $300 million into rebranding and improving technology at National Storage's portfolio through what is expected to be a yearslong effort, according to an investor presentation about the deal.
National Storage CEO David Cramer said in a statement that the acquisition with Public Storage reflects an "incredible transformation," which the company has undertaken in the past few years to refocus its portfolio to enhance operations and drive growth.
“Public Storage is the ideal strategic fit for our company given their best-in-class brand, operating platform, and future growth profile," Cramer added.
Behind the deal
Immediately prior to closing the deal, Public Storage plans to create a joint venture comprising 313 of National Storage's "high cash flowing properties" totaling 19.6 million square feet across 28 states and Puerto Rico with an estimated value of $3.3 billion, according to the release.
National Storage unitholders are expected to own 80% of the joint venture, with Public Storage holding the remaining interest. The venture, along with National Storage's existing joint ventures, total about 54% of National Storage's existing properties. Public Storage will wholly own 46% of National Storage's properties located in key growth markets. The joint venture is expected to be capitalized with $2.2 billion of property-level secured debt, including a mezzanine loan from Public Storage of about $240 million.
Additional details of which properties will be owned by which entity were not immediately disclosed by Public Storage. Officials declined to share addresses affiliated with each property ownership entity to CoStar News.
In all, Public Storage has arranged $4 billion in committed financing from Goldman Sachs Bank USA and Wells Fargo Bank through a $2 billion corporate bridge loan and a $2 billion joint venture off-balance sheet bridge loan expected to become permanent secured mortgage financing, according to the release.
Boyle takes over as CEO of Public Storage on April 1. The company will also be led by newly appointed Presidents Joe Fisher, Natalia Johnson and Chris Sambar.
For the record
For Public Storage, Goldman Sachs, Wells Fargo and Eastdil Secured are serving as financial advisers, while Wachtell, Lipton, Rosen & Katz is the company's legal adviser. DLA Piper is serving as Public Storage's real estate financing counsel. For National Storage, Morgan Stanley is the financial adviser, and Clifford Chance US LLP is the legal adviser.