“With all signs pointing to a market willing to withstand more aggressive rent increases, we expect the storage REITs to become increasingly comfortable pushing the limits (rent increases) in this unprecedented time for storage,” Baird analysts wrote. “Given historical peak occupancies heading into the leasing season, rental rate growth could surprise to the upside.”

Wells Fargo Securities LLC acted as lead financial advisor and SunTrust Robinson Humphrey also acted as a financial advisor to Sovran, while Phillips Lytle LLP and Hogan Lovells served as the REIT's legal counsel in connection with the deal. For LifeStorage, Citigroup Global Markets, Inc. acted as exclusive financial advisor and Latham & Watkins LLP served as counsel.

BUFFALO—Sovran Self Storage Inc. said Thursday that it had agreed to acquire privately owned LifeStorage LP for $1.3 billion in cash. Separately, the Buffalo-based REIT said it had launched a common stock offering to help fund the acquisition, which is expected to close in the third quarter.

The deal will add 84 of Roseville, CA-based LifeStorage's 92 properties to the Sovran portfolio, currently numbering about 500 owned and/or operated properties. It also opens up a number of new markets for Sovran, which operates under the Uncle Bob's Self Storage brand; these include Northern California and Las Vegas. The REIT's positions in existing markets such as Chicago and the major Texas cities will also be strengthened.

“LifeStorage has built a high-quality national portfolio, and these stores will enhance and complement our physical footprint and digital presence,” says David Rogers, Sovran's CEO. He notes that LifeStorage was founded in 2011, meaning that all of its properties have been built or acquired over the past five years. “While we believe these properties have been well run, we foresee improved operating results as we apply our customer service standards and transition these stores onto our web marketing and revenue management platforms.”

The merger between Sovran and LifeStorage will mark the sector's largest transaction since Extra Space Storage closed on its $1.4-billion acquisition of SmartStop Self Storage this past October. It occurs at a time when the outlook for self-storage fundamentals is positive. Baird Equity Research analysts reported that last month that Sovran had posted 9.9% same-store NOI growth in the first quarter from the year prior, while Public Storage Inc. grew its SSNOI by 10.4% year-over-year.

“With all signs pointing to a market willing to withstand more aggressive rent increases, we expect the storage REITs to become increasingly comfortable pushing the limits (rent increases) in this unprecedented time for storage,” Baird analysts wrote. “Given historical peak occupancies heading into the leasing season, rental rate growth could surprise to the upside.”

Wells Fargo Securities LLC acted as lead financial advisor and SunTrust Robinson Humphrey also acted as a financial advisor to Sovran, while Phillips Lytle LLP and Hogan Lovells served as the REIT's legal counsel in connection with the deal. For LifeStorage, Citigroup Global Markets, Inc. acted as exclusive financial advisor and Latham & Watkins LLP served as counsel.