Public Storage PSA has made headlines with its recent acquisition news. The self-storage giant announced the successful completion of its $2.2 billion acquisition of Simply Self Storage from Blackstone Real Estate Income Trust, Inc. (“BREIT”). This strategic move signals Public Storage's commitment to its growth strategy and determination to capitalize on the expanding self-storage market.
Public Storage anticipates that the acquisition from BREIT, which is externally managed by a subsidiary of Blackstone BX, will be accretive to funds from operations (FFO) per share, with accretion gaining momentum as the properties stabilize. The acquisition includes a substantial portfolio of 127 wholly owned properties spanning 18 states and offering 9 million net rentable square feet.
What's noteworthy is the geographical diversification of these properties across markets with consistently high population growth, double the national average since 2018. Around 65% of these properties are strategically located in high-growth Sunbelt markets, aligning perfectly with Public Storage's expansion goals.
Public Storage is focused on leveraging its industry-leading brand and operational platform to boost customer recognition and enhance performance. Its integration of an additional 25 properties into its PS Advantage third-party management platform augurs well for growth.
By combining Simply's experienced team with Public Storage's industry-leading brand and operating platform, PSA aims to deepen its presence in fast-growing markets and create additional avenues for growth and value creation. Public Storage financed the acquisition through $2.2 billion of senior unsecured notes, effectively utilizing its growth-oriented balance sheet.
This acquisition aligns seamlessly with Public Storage's opportunistic growth strategy. Since the beginning of 2019, PSA has expanded its portfolio by an impressive 33%, equivalent to 54 million net rentable square feet, through $10.7 billion of acquisitions, development and redevelopment, including properties under contract.
However, Public Storage is not the only self-storage REIT pursuing expansions. Its peer, Extra Space Storage EXR, also concluded the buyout of Life Storage, Inc. in an all-stock transaction in July 2023. This acquisition by Extra Space Storage has significantly enhanced its scale in the self-storage industry, making the combined entity the largest self-storage operator in the United States (based on the number of self-storage locations).
For Public Storage, the acquisition of Simply Self Storage is a strategic step toward expanding its already substantial footprint in the self-storage market. The company's focus on high-growth markets and ability to efficiently integrate new properties into its portfolio position it for continued success. Recent acquisition and development properties in its non-same-store pool now account for nearly 30% of Public Storage's portfolio, promising substantial growth for both the company and its stakeholders as these properties lease up over the coming years.
However, a development boom in certain markets could intensify competition and curb pricing power. Also, with tenants reverting to more normal move-out behavior, growth in occupancy and rent is expected to be limited. High interest rates add to its woes.
Shares of this Zacks Rank #3 (Hold) company have declined 5.5% in the past three months, wider than its industry’s fall of 2.6%.
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Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information.
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