CubeSmart to Acquire Storage West Platform for $1.69B

Self-storage properties operator CubeSmart (CUBE) recently revealed that it has entered into an agreement to acquire LAACO, Ltd., the owner of the Storage West platform, for about $1.69 billion. California-based LAACO is a self storage and real estate investment holding company.

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Following the news, shares of the company declined 1.9% to close at $54 in Monday’s extended trading session.

Details of the Deal

The company intends to finance the deal through the net proceeds from the issuance and sale of the company’s equity securities and through the proceeds from new long-term debt financing that the company intends to pursue prior to the closing of the acquisition, which is likely in the fourth quarter of 2021.

However, in the absence of such debt financing, the company intends to finance any remaining portion of the acquisition purchase price with proceeds from a committed $1 billion senior unsecured bridge loan facility and/or unsecured revolving credit facility.

Notably, the purchase price of $1.69 billion includes about $40.9 million of LAACO debt that will be repaid at, or shortly after, the closing.

With this buyout, CubeSmart will gain access to the much-desired self-storage space of the Western United States, which comprises markets like Southern California, Phoenix, Las Vegas and Houston.

Management Commentary

The CEO of CubeSmart, Christopher P. Marr, said, “The Storage West portfolio represents a very strategic transaction that will enhance our portfolio and further diversify our geographic exposure. This immediately accretive transaction is a unique opportunity to acquire a sizable portfolio of high-quality assets across the Southwest. The properties are all in top-40 MSAs that represent key growth markets with strong demographics that perfectly fit our external growth strategy and complement our existing portfolio.”

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Price Target

Recently, Evercore ISI analyst Steve Sakwa reiterated a Buy rating on the stock with a price target of $58, which implies upside potential of 5.4% from current levels.

The Wall Street community is cautiously optimistic about the stock and has a Moderate Buy consensus rating based on 3 Buys and 2 Holds. The average CubeSmart price target of $57.40 implies that the stock has upside potential of 4.3% from current levels.

Smart Score

CubeSmart scores a 7 out of 10 from TipRanks’ Smart Score rating system, indicating that the stock is likely to perform in line with market expectations. Shares have gained 62.3% over the past year.