With a flood of personal fairness producing a “powerful acquisition surroundings,” Chairman and CEO Arlen Nordhagen says self-storage REIT Nationwide Storage Associates Belief is bypassing offers that it considers too dear.

The inflow of personal investments into the self-storage sector has spurred traditionally low cap charges, Nordhagen defined on the REIT’s Oct. 31 earnings name. The typical second-quarter cap price for Class A amenities within the {top} 50 metro markets was 5.23 p.c, in keeping with business actual property companies firm Cushman & Wakefield.

“In consequence [of low cap rates], we’ve misplaced out on a handful of offers which have gone at costs that go away us scratching our heads a bit,” Nordhagen instructed Wall Avenue analysts.

Regardless of the lingering challenges posed by private-equity patrons, the Greenwood Village, CO-based REIT nonetheless goals to develop its asset base by about 10 p.c per 12 months, Nordhagen mentioned. That equates to an annual common of $500 million in acquisition quantity over the subsequent 5 to 10 years.

“Now, it’s not going to be each single 12 months that we are able to hit that,” he added, “however I do imagine over the long run we are able to try this.”

In the course of the third quarter, Nationwide Storage Associates spent $35.eight million on wholly owned acquisitions, lifting its nine-month deal complete to $416 million, Nordhagen mentioned. The REIT expects to finish the 12 months with $475 million to $500 million in wholly owned and joint-venture acquisitions.

“We loved sturdy acquisition quantity within the first half of 2019. We knew that our acquisition exercise can be front-end-loaded. So our tempo within the again half of the 12 months is in step with our expectations,” he mentioned.

The REIT continues to underwrite offers, albeit cautiously, Nordhagen mentioned. Going ahead, he mentioned, Nationwide Storage Associates executives stay assured of “strong” acquisition quantity because of:

  • The expansion of its community of regional operators. In a single fell swoop, a brand new regional operator can convey aboard $100 million to $1 billion value of property, Nordhagen mentioned.
  • A five- to six-year captive acquisition pipeline of over 100 amenities valued at greater than $1 billion.
  • The $1.5 billion-plus alternative to purchase out its present joint-venture companions, in addition to the prospect to enter new joint ventures.
  • The potential to buy amenities from impartial sellers outdoors its community of regional operators.

Nordhagen famous that about 35,000 impartial mom-and-pop operators within the U.S. personal one to a few self-storage properties apiece — all of which could possibly be acquisition fodder.

“We don’t wish to purchase all of these properties,” he mentioned, “however we definitely want to purchase lots of them … which are good institutional-quality property in markets the place we’ve got an excellent [regional operator] presence.”

On the acquisition entrance, Nationwide Storage Associates has stayed away from certificate-of-occupancy and non-stabilized properties, Nordhagen mentioned.

“We attempt to concentrate on shopping for stabilized properties,” he mentioned, “as a result of our expertise is that within the high-supply markets, the danger stage of the non-stabilized property is considerably larger, and in my expertise has not been well worth the worth. The danger is simply too nice.”

Different highlights of Nationwide Storage Associates’ third quarter:

  • Identical-store income elevated 3.7 p.c versus the year-ago interval.
  • Identical-store NOI rose 4.2 p.c in contrast with the identical interval a 12 months earlier.
  • Identical-store property working bills climbed 2.7 p.c versus the identical time in 2019.
  • Common same-store occupancy was 90.2 p.c, up from 89.9 p.c within the third quarter of 2018.
  • Markets that loved sturdy progress in same-store income included Atlanta, GA; Las Vegas, NV; and Riverside-San Bernardino, CA.
  • Markets that lagged in same-store income included Dallas, TX; Portland, OR; and Tulsa, OK.

About 40 p.c of its portfolio is being affected by new provide, principally within the {top} 50 metro markets.



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