SmartStop, Strategic Storage Growth Trust II REITs Close $280M Merger
The merger forms a comprehensive portfolio of 102,000 units in 152 fully owned properties with nearly 12 million net rentable square feet.
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After an announcement from earlier this year, the merger between SmartStop Self Storage REIT Inc., a self-managed and fully integrated self-storage company and real estate investment trust, and Strategic Storage Growth Trust II Inc. (SSGT II), a private REIT, has closed. The $280 million deal will see SSGT II become a subsidiary of SmartStop that formed to accommodate the acquisition. The combined companies boast a portfolio of 102,000 units across 152 fully owned properties comprising roughly 11.7 million net rentable square feet.
As the acquiring entity, SmartStop is set to gain all of SSGT II’s real estate assets, including 10 facilities spread out over seven states, and two joint venture assets in various stages of development — altogether making a combined total of 900,000 rentable square feet. Along with the assets, Smartstop is also receiving SSGT II’s interest in a site originally gained through another joint venture, as well as the rights to acquire a Southern California property.
The deal was structured as an all-stock transaction in which SSGT II stockholders would receive 0.9118 shares of SmartStop common stock for each share of SSGT II common stock that they own — an exchange ratio about 37% higher than SSGT II’s last offering price. Based on share and operating partnership unit counts at the end of the third quarter last year, SmartStop stockholders are set to own about 79% of the newly merged entity, with Strategic Storage Growth Trust stockholders pegged at an 11% stake. A 10% stake is reserved for management.
The Deets on the REITs
After a bold 2021, this year looks to see a continuation of some of the trends that bolstered self-storage REIT performance. With first-quarter reports now out in the open, many of the largest self-storage REITs have reported gains in everything from revenue to funds from operations (FFO), net operating income (NOI) and even occupancy rates.
In fact, SmartStop’s first-quarter report is among the most notable of the bunch, with its revenue reported at $45 million — an increase of nearly $14 million year-over-year. Likewise, Public Storage reported a 15.8% year-over-year increase for the quarter, a gain attributed to higher realized annual rent per available square foot. CubeSmart’s revenue jumped up by a comparable 15.6% when compared to the same period last year, while occupancy has more or less remained the same.
Across the board, the general feelings are positive for the future of self-storage investment. The industry seemingly hasn’t seen the end of the rent growth present since the worst of the pandemic, and demand for units remains on the rise as supply tapers. Barring any unforeseen circumstances, it looks as though 2022 will be another record year for the self-storage sector.
Related Questions
What are the benefits of investing in SmartStop and Strategic Storage Growth Trust II REITs?
Investing in SmartStop and Strategic Storage Growth Trust II REITs can provide investors with a number of benefits. These include a relatively easy starting point in commercial real estate investment, reduced need for hands-on property and operations management, stable dividend payments, attractive risk-adjusted returns, and the potential for higher dividends than other investment vehicles. Additionally, REITs have managed to outperform the S&P 500 and the rate of inflation over the last 20 years. REITs have a long history of providing investors with attractive returns.
What are the risks associated with investing in SmartStop and Strategic Storage Growth Trust II REITs?
Investing in REITs, including SmartStop and Strategic Storage Growth Trust II, carries some risks. These include the potential for a decrease in the value of the REITs, the potential for a decrease in the dividend payments, and the potential for a decrease in the liquidity of the REITs. Additionally, REITs are subject to the same risks as other investments, such as market risk, interest rate risk, and inflation risk.
SmartStop is a self-storage REIT that invests in self-storage facilities in the United States and Canada. It is subject to the same risks as other REITs, such as market risk, interest rate risk, and inflation risk. Additionally, SmartStop is subject to the risks associated with investing in self-storage facilities, such as the potential for a decrease in occupancy rates and the potential for a decrease in rental rates.
Strategic Storage Growth Trust II is a REIT that invests in self-storage facilities in the United States. It is subject to the same risks as other REITs, such as market risk, interest rate risk, and inflation risk. Additionally, Strategic Storage Growth Trust II is subject to the risks associated with investing in self-storage facilities, such as the potential for a decrease in occupancy rates and the potential for a decrease in rental rates.
How does the merger of SmartStop and Strategic Storage Growth Trust II REITs affect investors?
The merger of SmartStop and Strategic Storage Growth Trust II REITs is expected to create a larger and more diversified portfolio of self-storage properties for investors. The combined entity will have a portfolio of over 1,500 properties in the United States and Canada, with a total of over 20 million square feet of storage space. The merger is expected to provide investors with increased access to capital, improved liquidity, and greater diversification. Additionally, the merger is expected to provide investors with access to a larger and more diverse pool of potential tenants, as well as increased opportunities for growth and expansion. Source
What are the advantages of the merger of SmartStop and Strategic Storage Growth Trust II REITs?
The merger of SmartStop and Strategic Storage Growth Trust II REITs has several advantages. The merger creates a larger, more diversified portfolio of self-storage properties, with a combined portfolio of over 1,500 properties in the United States and Canada. The merger also provides access to capital for growth and expansion, as well as access to a larger pool of potential tenants. Additionally, the merger provides access to a larger pool of potential buyers, which could lead to higher sale prices for the properties. Finally, the merger provides access to a larger pool of potential lenders, which could lead to more favorable loan terms for Merit Hill Capital and other self-storage owners.
What are the potential drawbacks of the merger of SmartStop and Strategic Storage Growth Trust II REITs?
The merger of SmartStop and Strategic Storage Growth Trust II REITs could potentially lead to a decrease in capital appreciation. REITs are required to pay no less than 90% of their taxable income to investors as dividends, leaving only a meager 10% which can be reinvested by new acquisitions or capital improvements. This could limit the potential for growth in the merged REITs.
In addition, the merger could lead to a decrease in the number of third-party operators managing the properties. Merit Hill Capital, for example, utilizes several third-party operators to manage its properties, including Extra Space Storage and CubeSmart. It is unclear how the merger of SmartStop and Strategic Storage Growth Trust II REITs would affect the number of third-party operators managing the properties.
How does the merger of SmartStop and Strategic Storage Growth Trust II REITs impact the self-storage industry?
The merger of SmartStop and Strategic Storage Growth Trust II REITs is expected to create the second-largest self-storage company in the United States. The combined entity will have a portfolio of over 1,500 properties across the country, with a total of over 100 million square feet of storage space. This merger is expected to create a more competitive market for self-storage, as the larger company will be able to offer more competitive rates and services. Additionally, the merger is expected to create more opportunities for smaller self-storage companies, such as Merit Hill Capital, to acquire properties in larger metropolitan areas. Source