Blackstone Group has inked a deal to buy Simply Self Storage from Canada’s Brookfield Asset Management for about $1.2 billion, the Wall Street Journal reported.
Blackstone’s (BX) private-equity firm’s nontraded real-estate investment trust, known as BREIT, is buying the 8 million square-foot portfolio of self-storage facilities. The deal is expected to be announced on Monday, according to the report.
BREIT, which already owns 2.6 million square feet of self-storage facilities, plans to continue to acquire smaller assets in the fragmented industry and run them under the Simply brand, Tyler Henritze, head of acquisitions in the Americas for Blackstone’s real-estate group, told the WSJ.
“The opportunity to acquire a $1 billion-plus storage portfolio, including a brand and a team, is incredibly rare,” Henritze said.
Henritze added that Blackstone views self-storage assets as attractive businesses because they require little in the way of capital expenditures, have relatively low turnover and offer the ability to raise rents since they typically don’t represent a major portion of their tenants’ monthly expenditures. Self-storage has also remained resilient through economic cycles. That has proven even more true during the pandemic as Americans who might no longer be tied to their office locations have moved out of cities or gone to stay with relatives, Henritze commented.
According to the WSJ, Brookfield acquired Simply in 2016 for $830 million when it had 90 locations, and grew it to more than 200 locations over the next two years through a combination of acquisitions and new development. In 2018, Brookfield sold 112 self-storage facilities to a joint venture of National Storage Affiliates Trust and an affiliate of Heitman Capital Management for $1.3 billion. The deal allowed it to recoup the entirety of its investment up until that point.
Blackstone’s real-estate trust, which was launched in 2017, has a net-asset value of $19 billion, up 46% from the end of 2019.
BX shares have recouped a large chunk of their losses but are still down 2.3% since the beginning of the year. Looking ahead, the average analyst price target of $63.90 indicates 17% upside potential is lying ahead over the coming year.
Meanwhile, Oppenheimer analyst Chris Kotowski recently maintained a Hold rating on the stock, saying that his current valuation framework suggests that the stock is fairly valued.
“We view the stock as an attractive core growth holding, but near-term it is trading at a premium to the S&P, roughly in line with its average last year,” Kotowski wrote in a note to investors.
Overall BX scores a Strong Buy analyst consensus which breaks down into 4 Buys versus only 1 Hold. (See Blackstone stock analysis on TipRanks).