Dutch pension fund manager APG and Singapore’s CapitaLand Investment are committing up to S$1.14 billion ($810 million) to take over and expand the region’s largest self-storage operator, Extra Space Asia, according to a joint announcement Thursday.
The two property heavyweights have agreed to invest an initial S$570 million in equity to acquire the Singapore-based mini-storage platform, which owns, leases and operates 73 facilities spanning over 1 million square feet (93,000 square metres) of space across six Asian nations.
“Self-storage is one of the alternative asset classes that has remained impressively resilient during the pandemic and looks set to continue benefiting from strong growth tailwinds supported by favourable demographics and lifestyle trends in Asia,” said CLI’s chief executive of private equity alternative assets Patrick Boocock. “This is an opportune time to enter the emerging sector with a new platform that will augment CLI’s funds under management and fee-related earnings.”
The partners expect to invest up to S$1.14 billion as they expand the joint venture in an Asian self-storage market where Blackstone, Brookfield and Warburg Pincus are already rapidly acquiring and growing regional platforms.
Aiming for Mini-Shed Scale
With APG taking a 90 percent stake in the JV to CLI’s 10 percent share, the joint venture is taking over a self-storage portfolio with 37 locations in Taiwan, 11 each in Singapore and Japan, seven facilities in South Korea, five in Malaysia and two in Hong Kong.
“The self-storage sector is ideally accessed at scale and with local execution capability. On behalf of our pension fund clients, we are delighted to be partnering with CLI and the ESA team to expand this platform throughout the Asia region,” said Graeme Torre, head of real estate for APG Asset Management Asia.
With its portfolio 91 percent occupied as of 31 December last year, Extra Space Asia generated S$48.38 million in combined revenue in 2021. Of the 64 locations in its network as of the end of last year, 21 were owned by the company, while the rest were leased, according to documents seen by Mingtiandi.
62 percent of the company’s 2021 revenue came from Singapore, which was also its biggest market by leasable space at 583,362 square feet. The portfolio generated net operating income of S$24.3 million last year, and is forecast to see its NOI rise by 33.7 percent to S$32.5 million in 2025.
With even the most affluent of Asia’s urban residents wedging themselves into smaller homes to deal with rising housing costs, APG and CapitaLand are betting on opportunities to grow the Extra Space platform.
Following the acquisition, which has yet to close, the joint venture will retain Extra Space’s existing management team led by its CEO Kenneth Worsdale, while reorganising the business into separate property and operating companies to facilitate expansion.
Worsdale said having access to the resources of APG and CLI will help the 15-year-old regional platform to further cement its reputation as a “market leader in the self-storage industry.”
In a marketing document for the sale prepared by JLL, which acted as sole advisor to Extra Space in the transaction, the property consultancy pointed to the growth of small to mid-sized online retailers as helping to support demand for self-storage, as well as to rising rents for space in the facilities.
With Hong Kong and Singapore identified as the most active self storage markets in Asia Pacific, the document pointed out that, during 2020, rental rates for facilities in Hong Kong rose by 1 percent to $7 per square foot per month while Singapore saw tariffs increase by 1.3 percent reaching to $3 per square foot.
CLI managing director for Southeast Asia Patricia Goh said scaling the platform will involve “mergers and acquisitions as well as conversion of existing assets into self-storage facilities,” while representatives of the joint venture declined to give further details on expansion plans.
Betting on Urbanisation
“This asset class is fully aligned with the theme of urbanisation, which has been one of our core investment beliefs for many years and is a key tenet of our environmental performance aspirations,” said APG’s Torre, with those same macro drivers attracting a number of the world’s largest institutional investors to Asia’s self-storage sector in recent years.
Capitaland’s investment arm is returning to the mini-shed market just over three years after selling its StorHub self-storage business to Warburg Pincus in early 2019 for S$185 million.
Since then, StorHub has grown from having 12 locations in Singapore and Shanghai at the time of sale to a major operator with 13 facilities each in the Lion City and mainland China, four locations in Hong Kong as well as exposure in Japan, Korea and Malaysia.
Earlier this month, Storhub further expanded its Hong Kong presence by purchasing a floor in an industrial building for HK$66.27 million ($8.4 million), with its rival Blackstone one week later completing a purchase of a Kowloon industrial building for HK$850 million through its JV with self-storage operator Storefriendly.
In March, Toronto-based Brookfield quietly acquired Greater China self-storage operator RedBox from InfraRed NF, and followed that deal with back to back acquisitions of additional self-storage facilities in Hong Kong to grow the company’s footprint in the city.