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National Storage Affiliates Increases Tax Deferred Equity Options

Posted: 2/6/2018
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Recently, the owners of a self storage portfolio in the western United States sold their properties to National Storage Affiliates (NSA) and decided to split their $40 million of equity value into three different forms to create an optimum situation for the sellers. Approximately $20 million was taken in cash at closing and the roughly $20 million balance of the equity was accepted in tax deferred Operating Partnership (OP) Units.

However, because the sellers wanted higher dividends for part of the tax deferred equity and higher stock upside potential on the other part, they negotiated with NSA to receive approximately 60% of this equity in regular “common” OP Units paying a 4.3% dividend yield but carrying full stock price upside potential. They took the remaining 40% in preferred OP Units, which pays a higher 6% dividend yield, but has low downside risk and very little stock price upside. The blended dividend yield was 5.0% and the seller retained 60% of the blended upside potential of stock appreciation. This specifically designed structure provided the seller with the risk adjusted returns that met their future investment goals while also providing a large initial cash payment for immediate needs.

Exchanging for OP Units also opens the door to estate planning options that allow owners the ability to manage the transfer of wealth to family, employees and their favorite charities. In addition, a significant benefit of owning OP Units in a REIT is the diversification across a large geographic portfolio. NSA now owns 530 properties across 29 states.

For more information about how NSA can help determine if your property(s) would qualify for a contribution and exchange for OP Units, please contact: Curt Fleming, Knightsbridge Realty Capital, at 949-719-1994 or CFleming@KBRCInc.com

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