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Half a Billion Dollars on 22 Self Storage Assets

August 29, 2012 by Sam Kennard

In late 2011, CubeSmart negotiated a ‘seismic’ deal to acquire 22 A-grade Self Storage Assets in the New York Area. This transaction ‘Closed’ in August this year.

CubeSmart is a New York Stock Exchange REIT (NYSE:CUBE) with 456 storage centres across the United States.

The $560 Million acquisition of the 22 storage centres from Storage Deluxe has created some buzz in the self storage investment sector. It reflects a very sharp 6.2% capitalisation rate on stable assets.

However, the portfolio boasts being located in an extremely tight high-end market and developed to an A-grade level. It is observed by Chris Sonne of Cushman & Wakefield that securing 1.6 million square feet (150,000 square metres) in a single transaction was very efficient and liked by the market. Assembling a similar scale and quality number of assets would be virtually impossible.

Chris Marr, President of CubeSmart, asserts the transaction represents great value: “It was a significant portfolio in arguably the best storage market in the world that was largely purpose-built, as opposed to conversion of a building”.

He claims the sharp low-six Capitalisation Rate is not a meaningful comparable for other typical markets in the U.S. It’s a unique portfolio deserving of the premium.

The U.S. self storage sector is enjoying an upswing across the country. Interstate migration to employment centres and lack of new supply are underpinning occupancy growth in the sector.

The second quarter reporting season of the storage REITS’s recently concluded. All REIT’s revealed growing occupancy and improvements in NOI.

Author: Sam Kennard, Managing Director, Kennards Self Storage

Sam Kennard

Sam joined the Family Self Storage Business in 1991. He was appointed Managing Director in late 1994. In that time Kennards Self Storage has grown from 8 locations to over 95 today. The company is an active and specialised developer of property, focussing on expanding the Kennards Self Storage portfolio in Australia and New Zealand. Today, Kennards Self Storage is the market leading Self Storage Brand and industry innovator and employs over 230 people in Australia and New Zealand. The company remains a privately owned and family run business.

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