W. P. Carey Inc., a global net-lease real estate investment trust (REIT) that owns more than 100 self storage facilities nationwide, completed a merger with its managed fund CPA:17 – Global (CPA:17) on Oct. 31. The $5.9 billion deal brought 44 net-lease self storage properties, among other assets, fully under the W. P. Carey wing, boosting its global, diversified portfolio to 1,186 net-lease properties comprising 133 million square feet. The properties, primarily in the United States as well as Northern and Western Europe, are leased to 304 tenants.
"The completion of this transaction marks an important milestone for W. P. Carey, essentially transforming us into a pure-play net-lease REIT with a simpler business and more valuable earnings," W. P. Carey CEO Jason Fox said in a press release. "We've added a high-quality diversified portfolio at a favorable cap rate of approximately 7 percent and, having assembled and managed the assets on behalf of CPA:17, expect a seamless transition.”
It is not clear whether W. P. Carey will hold on to the CPA:17 storage properties or sell them. During the REIT’s Nov. 2 earnings call with financial analysts, Brooks Gordon, head of asset management, indicated the company was exploring its options, including a possible sale, according to the “SpareFoot Storage Beat,” a self storage industry blog.
“We are comfortable holding those until we have the best option for us,” Gordon said during the call. “I would say stay tuned on what we end up doing there.”
The CPA:17 facilities are expected to generate $26 million in annualized net operating income, according to Toni Sanzone, the REIT’s chief financial officer.
Industry analysts have speculated the properties could generate a bidding war between large self storage operators and investors looking to quickly build a sizable portfolio, if they came to market. “Any stabilized portfolio, including the W. P. Carey portfolio, currently generates tremendous interest from both private-equity capital firms and several of the public companies, as well as joint ventures,” Marc Boorstein, principal at MJ Partners Self Storage Group, told SpareFoot.
Michael Mele, executive managing director of investments for real estate firm Marcus & Millichap, told SpareFoot the CPA:17 properties are managed by publicly traded self storage REITs CubeSmart and Extra Space Storage Inc. Those assets are separate from the 78 net-lease self storage properties W. P. Carey owned prior to the merger, which are occupied by U-Haul International, Inc.
The unloading of CPA:17 self storage facilities wouldn’t be unprecedented. In 2016, National Storage Affiliates Trust acquired a 22-property portfolio in California from the fund. Those facilities comprised 1.6 million square feet and were under management by Extra Space at the time of the deal.
Despite W. P. Carey’s prominence among self storage owners—the company ranked No. 11 on the 2018 Inside Self-Storage Top-Operators List, with 113 facilities comprising more than 8.6 million net rentable square feet—self storage is the smallest segment of the company’s portfolio at 3.3 percent of its holdings. In contrast, industrial/warehouse properties comprise 44 percent, followed by office (25.2 percent) and retail (18.5 percent), according to the company website.
Despite those numbers, U-Haul is the company’s second largest tenant behind Hellweg, a German home-improvement and lumber retailer.
Based in New York, W. P. Carey is an investment-management company that oversees a global investment portfolio and has an enterprise value of more than $17 billion. It manages a series of non-traded, publicly registered and private investment programs with assets under management of approximately $7.5 billion. It provides companies worldwide with long-term sale leaseback and build-to-suit financing and engages in other types of real estate-related investment.