Extra Space Storage Inc. agreed to buy SmartStop Self Storage Inc., a California-based nontraded real estate investment trust, for about $1.4 billion to expand its property holdings as the self-storage industry grows.
Extra Space will pay $1.29 billion, with the remaining $120 million coming from SmartStop’s sale of a California property and interests in seven locations, according to a statement Monday. The Salt Lake City-based REIT will own 121 SmartStop properties and manage 43 third-party sites in the U.S. upon completion of the deal.
“These 164 stores will enhance and complement our physical footprint and digital presence,” Spencer Kirk, chief executive officer of Extra Space, said in the statement.
Self-storage companies have been among the top performers among U.S. REITs in the past 12 months, according to data compiled by Bloomberg. Demand for the facilities is driven by the accumulation of possessions such as furniture and clothes, and life changes such as moving and marriage. Small businesses also keep inventory in storage units.
Extra Space is the second-largest U.S. self-storage REIT by market value, after Public Storage. The stock has climbed 26 percent in the past 12 months, more than double the 11 percent gain in the Bloomberg REIT self-storage index. The broader Bloomberg REIT index rose 2.9 percent in that time.
SmartStop investors will receive $13.75 a share in the deal. The purchase price is about 27 percent more than the company’s most recently announced net asset value, CEO H. Michael Schwartz said in a separate statement. The Ladera Ranch, California-based REIT, which owns properties in 21 states and Toronto, is the seventh-largest owner and operator of self-storage facilities in the U.S., according to the statement.