The $606 million sale by Public Storage Inc. of a majority stake in its European properties, the details of which were announced last week, will allow the company to focus on domestic operations while maintaining a share of the lucrative overseas market.
The transaction enables Glendale-based Public Storage to cash in on part of its portfolio without surrendering its entire stake in a promising growth market, said Paul Adornato, senior analyst for BMO Capital Markets in New York.
“Public Storage’s European operations are a real gem insofar as the storage industry is new to many parts of the continent and represent a great opportunity for growth over the next 10 to 15 years,” Adornato said.
The world’s largest owner and operator of self storage facilities acquired the European properties in 2006 when it purchased Shurgard Storage Centers Inc. for $5.5 billion. Shurgard’s domestic portfolio was immediately integrated into Public Storage while Shurgard Europe continued as a separate operating entity
“When we bought Shurgard, we were more interested in the American properties because the facilities were closely located to our existing facilities, which allowed us to gather scale advantages and cut costs,” said Clemente Teng, vice president of investor relations for Public Storage, which is structured as a real estate investment trust.
“The European operations have improved significantly since we acquired them,” he added. “When we received them, the occupancy was about 80 percent. Now it is close to 90 percent and operating income is growing.”
Shurgard Europe currently has 174 storage facilities totaling about 9 million square feet of rentable space.
The New York Common Retirement Fund bought the majority stake in Shurgard Europe, although Public Storage will continue as the managing member of the newly formed joint venture. But while the European market for storage facilities offers a considerable potential for growth, there are few opportunities to expand through acquisitions.
Public Storage will rely on Shurgard Europe’s existing management team to direct organic growth from its headquarters in Brussels, Teng said.