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Friday, Aug 12, 2022

Public Storage Hunts for ‘Opportunistic Growth’

 This year, Public Storage spent a combined $3.3 billion on acquiring self-storage portfolios that expanded the market reach of the Glendale-based company in the Dallas-Fort Worth and Washington, D.C. markets.

In November, the real estate investment trust and management company acquired 56 All Storage facilities for $1.5 billion. The portfolio comprises 7.5 million net rentable square feet and included 52 facilities in the Dallas-Fort Worth market, three in Oklahoma City, and one in Killeen, Texas.

“This acquisition reflects Public Storage’s continued execution of its opportunistic growth strategy,” the company said in a statement. That strategy includes Public Storage’s ability to access financing because of its sheer size, as well as a checklist to increase an asset’s value through marketing and redevelopment.

In the case of All Storage, deal, “many of the properties were recently developed, resulting in a current 75 percent occupancy level, which provide significant upside as we move them on to our industry-leading platform,” Public Storage Chief Executive Joseph Russell said during the company’s third-quarter earnings call last month.

Public Storage will fund the acquisition with unsecured debt, immediately accretive to funds from operations with accretion accelerating through 2025. 

With this acquisition, the REIT now operates 172 locations and 15.5 million net rentable square feet in the Dallas-Fort Worth market.

“So a huge opportunity to grow, and actually put additional presence in parts of the Dallas-Fort Worth market, particularly Fort Worth that we were lighter in,” Russell said during the earnings call. “And Fort Worth, for instance, like Dallas as a whole, or the Dallas Fort Worth Metroplex is growing dramatically. So we’re really encouraged by that, population growth is very strong, good household income and we really like the multiple attributes that we will see and continue to see with our industry-leading position in that particular market.”

Mid-Atlantic market

In April, Public Storage, announced that it had closed on the acquisition of ezStorage for $1.8 billion. For this deal, the company estimated its in-house development team “will expand the portfolio’s square footage by 10 percent through development opportunity at eight of the sites.” 

Founded in 1987 by Anthony Manganaro, ezStorage was a family-owned self-storage company led by Todd Manganaro, the founder’s son.

That transaction added 48 properties to Public Storage’s footprint, or 4.2 million net rentable square feet, located in submarkets across Washington D.C., Virginia, and Maryland. 

In combination with Public Storage’s existing market presence, the company’s Mid-Atlantic portfolio totals 163 properties and 11.3 million net rentable square feet.

The company funded the acquisition by utilizing its growth-oriented balance sheet to issue $2 billion of senior unsecured notes. 

“I am … proud of the Public Storage team’s execution of our opportunistic growth strategy,” Russell said in a statement. “Since the start of 2019, we have expanded our portfolio by 22 million net rentable square feet, or 13 percent through $4.3 billion of acquisitions, development and redevelopment. We continue to see broad opportunity for growth.”

During the third-quarter earnings call, UBS Analyst Michael Goldsmith asked Russell how Public Storage can maximize the growth of these acquisitions on its platforms.

“Even when it’s highly concentrated as what you saw with ezStorage and now again with the All Storage portfolio in two big metropolitan markets … it points to the ability that we have from a structure and a scale and operating prowess standpoint,” Russell said.

Public Storage’s in-house development team will expand the portfolio’s square footage by 10 percent through development opportunity at eight of the sites.

In all, Public Storage has interests in 2,678 self-storage facilities in 39 states, with about 186 million net rentable square feet. 


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