Gannon says larger, well-capitalized entities should be in a position to acquire properties and portfolios with the expectation of deriving better efficiencies and improved operating income from the properties as well as the ability to access better financing terms. We also believe that smart and aggressive acquisition programs with experienced management teams can position themselves to accumulate single properties and smaller portfolios into attractive REITs that can be listed on an established stock exchange, sold or merged into the larger traded REITs at attractive prices.”

Schwartz and Gannon agree that self-storage is a consistently strong asset class. “Self-storage is a good investment in good times and not-so-good times,” Schwartz says. Gannon adds, “Good operators are able to manage rental rates and occupancy while minimizing expenses, providing solid net operating income per dollar of capital investment. We have observed great long-term trends in this asset class over the past 20 years and foresee strong growth over the next several years.”

Latham & Watkins LLP advised Extra Space in the acquisition and offering with a corporate team led from the firm's San Diego office by partner Craig Garner and associates Anthony Gostanian, Kevin Reyes and Jeffrey Woodley. Advice was also provided on tax matters by partners Michael Brody and Ana O'Brien, with associate Eric Cho in Los Angeles; on employee benefits matters by counsel Holly Bauer in San Diego; on real estate matters by partner David Meckler in Orange County; and on environmental matters by partner Christopher Norton in Orange County.

Latham & Watkins cites many benefits to Extra Space in the merger. Extra Space will gain additional physical and digital scale in markets where it already has a strong operating presence; the portfolio includes well-located, high-quality physical facilities; and the acquired sites provide opportunities for occupancy and rate increases and other income opportunities. In addition, the new property-management relationship with Strategic Storage Trust II Inc. and Strategic Storage Growth Trust Inc., entities affiliated with SmartStop, was cited as a benefit to Extra Space.

In addition, according to Latham & Watkins, Extra Space has announced the pricing of an underwritten public offering of 5,500,000 shares of its common stock at a price to the public of $68.15 per share. The gross proceeds from this offering are expected to be approximately $374.8 million, before deducting underwriting discounts and commissions and estimated offering expenses payable by Extra Space. Wells Fargo Securities, BofA Merrill Lynch and Citigroup are acting as the joint book-running managers for the offering. Extra Space has granted the underwriters a 30-day option to purchase up to an additional 825,000 shares; the offering is expected to close on or about June 22.

Extra Space intends to use the net proceeds of this offering to partially fund the SmartStop acquisition. Latham & Watkins did not return GlobeSt.com's request for further comment on the Extra Space/SmartStop merger before deadline.