Public Storage has completed its acquisition of National Storage Affiliates Trust, expanding its self-storage portfolio to more than 4,500 properties and approximately 327 million rentable square feet.
Under the merger agreement, National Storage Affiliates shareholders became entitled to receive 0.14 of a Public Storage common share for each NSA common share they held at closing.
The acquisition adds more than 1,000 properties and over 550,000 storage units to Public Storage’s platform. Nearly 500,000 NSA customers will transition to the Public Storage brand and operating system.
Public Storage plans to apply its PS Next operating model across the acquired portfolio. The model combines digital customer tools, centralized operations, property management systems and standardized processes intended to improve occupancy, revenue and operating efficiency.
The company expects the acquisition to increase funds from operations per share within the first year after closing. Funds from operations, commonly used to evaluate real estate investment trusts, adjusts net income for items such as real estate depreciation and certain property sales.
Public Storage expects the transaction to add approximately $0.35 to $0.50 per share to FFO after achieving an estimated $110 million to $130 million in annual run-rate synergies over three to four years.
The projected savings and revenue benefits are expected to come from economies of scale, portfolio integration, operating efficiencies and application of Public Storage’s technology and customer platform. Actual results will depend on the pace and cost of integrating NSA’s properties.
The transaction also created a joint venture containing 313 former NSA properties across 28 states and Puerto Rico. Certain legacy limited partners in NSA’s operating partnership own approximately 80% of the venture, while Public Storage holds the remaining interest.
Public Storage will exclusively manage the joint venture portfolio. It will receive property management, asset management and tenant reinsurance income from the venture.
The joint venture obtained approximately $2 billion in secured mortgage financing from Goldman Sachs Bank USA and Wells Fargo Bank. Public Storage also provided $237 million in mezzanine financing.
Mezzanine financing generally sits between senior mortgage debt and equity in a property’s capital structure. It typically carries greater risk and a higher expected return than senior secured financing.
The completed acquisition advances Public Storage’s PS4.0 strategy, which focuses on deploying capital into acquisitions, development and operating initiatives intended to increase earnings and cash flow per share.
The combined platform includes Public Storage’s U.S. portfolio, its investment in European self-storage operator Shurgard and its planned entry into Canada through Public Storage Canada.
Goldman Sachs, Wells Fargo and Eastdil Secured served as financial advisers to Public Storage. Wachtell, Lipton, Rosen & Katz provided legal counsel, DLA Piper advised on real estate financing and Kekst CNC served as strategic communications adviser.
Morgan Stanley was National Storage Affiliates’ exclusive financial adviser. Clifford Chance provided legal counsel, and Joele Frank, Wilkinson Brimmer Katcher served as strategic communications adviser.
KEY QUOTE:
“The NSA acquisition represents the first major PS4.0 Value Creation Engine milestone, demonstrating the Company’s focus on disciplined and accelerated investment activity that grows earnings and cash flow per share for our shareholders.”
“Our team is hard at work deploying our proven integration playbook to realize the transaction’s full potential, applying PS Next to a large-scale portfolio that offers significant value creation opportunities.”
“We are thrilled to officially welcome NSA’s customers and team members to Public Storage and the industry’s leading platform.”
Tom Boyle, CEO of Public Storage
