Sovran Self Storage, Inc. (NYSE:SSS) said May 19 that it has agreed to buy LifeStorage, LP, a privately owned self-storage operator, for approximately $1.3 billion in cash.
Sovran operates more than 550 self-storage facilities in 26 states under the name Uncle Bob’s Self Storage.
LifeStorage, based in Roseville, California, currently operates 92 self-storage properties in nine states. Upon completion of the acquisition, Sovran will own 84 LifeStorage facilities, with a purchase contract for three additional facilities to be delivered in late 2016 and early 2017.
The acquisition will provide Sovran with access to new markets, including Northern California and Las Vegas. It will also add to Sovran’s existing presence in cities such as Chicago, Dallas and Los Angeles.
“LifeStorage has built a high-quality national portfolio, and these stores will enhance and complement our physical footprint and digital presence,” said David Rogers, CEO of Sovran. He added that Sovran anticipates “improved operating results as we apply our customer service standards and transition these stores onto our web marketing and revenue management platforms.”
R J Milligan, a senior research analyst at Robert W. Baird & Co., said adding Northern California and Las Vegas, as well as adding density in existing markets, "should help improve portfolio metrics and warrant an implied cap rate closer to the other self-storage peers."
David Toti, senior REIT analyst at BB&T Capital Markets, noted that scale is increasingly the most important factor in improving self-storage operating performance, "and this transaction moves Sovran in the right direction."
Although Sovran has secured $1.35 billion in bridge financing, the company intends to permanently finance the transaction with proceeds from planned equity and debt offerings. To that end, Sovran announced that it had initiated a public offering of 6 million shares of common stock. Sovran also granted the underwriters a 30-day option to purchase up to 900,000 additional shares.
The transaction is expected to close in the third quarter of 2016.