Fund buys storage stake

Real Estate Weekly, August 11, 2004

Heitman LLC has acquired, on behalf of its Heitman Value Partners Fund, LP, a majority stake in a portfolio of self-storage facilities operated by Storage USA, in a transaction valued at $114 million.

HeRman will acquire an 80% interest in the portfolio, which consists of 21 storage facilities totaling 1.5 million square feet. Storage USA will retain a 20% interest.

The storage facilities are located across 16 metropolitan areas in 11 states including California, New Jersey, Maryland and Virginia. Currently, the portfolio has an overall occupancy rate of 81 percent.

According to Lewis Ingall, executive vice president at Heitman, the US self-storage industry experienced a period of over-building in the early 2000s, which resulted in high vacancies and lower net operating income for storage owners.

"Construction has trended lower, and now that the economy is improving, the industry is poised to rebound. We're expecting to see stabilization and increases, in rental levels, and a burning off of concessions," said Ingall.