SmartStop Self Storage REIT says it will acquire and merge with Strategic Storage Trust IV Inc., in a transaction valued at about $370 million US. The deal will create a company with operations in the U.S. and Canada totalling 136 wholly owned properties and five joint venture properties in Toronto in partnership with SmartCentres REIT (SRU-UN-T).
While SmartStop and Strategic have been separate companies, the merger will not affect branding. Strategic’s properties have all operated under the SmartStop brand.
The combined gross book value of the two companies’ assets is $1.5 billion (all figures US unless noted).
“We are excited to announce this transaction and look forward to combining the high-quality assets in the SST IV portfolio with SmartStop’s existing portfolio and operational platform.” said Michael S. McClure, CEO of California-based SmartStop, in the announcement Tuesday night. “With this merger, the combined company will be better positioned to recognize expense efficiencies, reduce borrowing costs, and aggregate size and scale for the future.
“Since all of the SST IV portfolio is already branded as SmartStop Self Storage, there will be total continuity of operations throughout the process.”
The Toronto properties
Strategic owns 24 properties in nine U.S. states as well as its 50-50 interest in the five Greater Toronto Area properties with SmartCentres. The first of those five GTA properties recently opened at 145 Wicksteed Ave. in Toronto, while the other four remain in various stages of development.
The Wicksteed site was constructed as a state-of-the-art facility including approximately 1,000 climate-controlled units and 100,000 square feet of leasable space. The three-storey building includes elevator access, drive-in loading bays and what the company called “state-of-the-art security systems.”
SmartCentres REIT, which is based in Toronto and is one of Canada’s largest REITs, also has a partnership ongoing with SmartStop itself. This partnership is also involved in developing and owning self-storage assets in the GTA.
In total, SmartCentres is partnered on 10 self-storage facilities with Smart Stop and Strategic. The portfolio will include about 9,100 units at full build-out, with a leasable area of 1.2 million square feet and an estimated investment of $206 million Cdn.
Strategic Storage Trust’s portfolio
The total Strategic portfolio, including the joint venture property developments, represents a total of approximately 22,500 self-storage units and 2.6 million net rentable square feet.
The agreement remains subject to shareholder and other customary approvals, and is expected to close in the first half of 2021.
The agreement calls for Strategic stockholders to receive 2.1875 shares of SmartStop common stock for each Strategic share. This represents an increase of $0.10 per share from Strategic’s most recent estimated NAV, when compared to SmartStop’s most recent estimated NAV of $10.40 per share.
When the transaction closes, SmartStop stockholders will own 64 per cent of the combined company, SST IV stockholders 25 per cent and management 11 per cent.
“Combining with SmartStop provides a unique opportunity for SST IV to build on its existing portfolio of high-quality assets, diversifying into a larger portfolio of 136 properties and consolidating with the SmartStop Self Storage brand,” said Strategic chairman and CEO H. Michael Schwartz.
“The economies of scale and financing options that will be available will help drive overall returns and we believe that being a part of SmartStop should compress SST IV stockholders’ timeline for liquidity.”
About SmartStop Self Storage REIT
SmartStop is a self-managed REIT with a team of approximately 390 employees. Through its indirect subsidiary SmartStop REIT Advisors, LLC, the trust also sponsors other self storage programs, including Strategic and other private programs.
SmartStop is the 10th-largest self storage company in the U.S., with approximately $1.7 billion of real estate assets under management, including an owned and managed portfolio of 148 properties in 19 states and Toronto, comprising approximately 99,000 units and 11.2 million rentable square feet.