Harrison Street Sells 22 Self-Storage Properties for $223M

Harrison Street Real Estate Capital has sold 22 self-storage properties totaling 1.7 million square feet to CubeSmart as the first part of a $223 million, two-tranche deal.
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Harrison Street Real Estate Capital has sold 22 self-storage properties totaling 1.7 million square feet to CubeSmart as the first part of a $223 million, two-tranche deal.

NGKF Capital Markets, which represented the seller and secured the buyer, said the properties are located in California, Florida, Illinois, Nevada, New York, Ohio and Rhode Island. CubeSmart said it paid $195.5 million for the first part of the transaction and will pay $27.5 million for the remaining four properties located in Illinois, according to its third-quarter financial statement. The second deal should be completed by late March.

New York-based NGKF Capital Markets said 10 of the properties were managed by CubeSmart, a self-storage REIT and the fourth-largest owner and operator of self-storage facilities in the United States. Ten additional properties were managed by Morningstar and the remaining two were owned in a joint venture with StorQuest, according to a release from NGKF Capital Markets.

“This is a rare opportunity to acquire such a geographically diverse and high-quality portfolio in the self storage industry,” Aaron Swerdlin, NGKF Capital Markets executive managing director, stated. “The portfolio allows the buyer in one transaction to significantly enhance its already expansive national footprint with a collection of carefully cultivated and maintained facilities by an established property owner.”

Swerdlin, who is based in Houston, arranged the deal along with Senior Managing Director Kenneth Cox in Memphis. The two head up NGKF Capital Markets’ Self Storage Group and have handled more than $5 billion in self storage transactions during their careers, including a $326.2 million deal last year on behalf of a partnership of Clarion Partners and Private Mini-Storage and Private Mini Storage, independently.

Harrison Street, a Chicago-based real estate private equity firm, has about $7.3 billion in assets under management through commingled funds and public securities products. The commingled funds focus on education, healthcare and storage sectors. In October 2013, Harrison Street sold 43 self-storage properties totaling 22,500 units in five states to Public Storage REIT.

CubeSmart, headquartered in Malverne, Pa., said in its third-quarter filing that it expects to acquire five additional facilities in separate contracts totaling $43.4 million by Dec. 31. On Oct. 30, the REIT stated that year-to-date it had acquired 25 assets for $293.5 million, including three assets it purchased during the third quarter for $38.9 million.

Marcus & Millichap said in its Second-Half 2014 Self-Storage Research report that the sector was surging amid an improving economy.

“Space demand is growing significantly in conjunction with an expanding economy, while restrained supply growth persists,” the report stated. “Recently, the exceptional property performance posted by self-storage REITs has brought greater attention to the sector and raised its stature among commercial real estate investors.”

Marcus & Millichap’s research showed transaction velocity rose 5 percent over the past year with dollar volume climbing nearly 10 percent nationwide.

The outlook for the sector is strong because “greater access to debt will enable additional investors to enter the market and make acquisitions in the year ahead,” according to the report.