Brookfield and GIC make $4bn bid for National Storage REIT

Brookfield and GIC’s $4bn proposal to buy National Storage REIT now throws the spotlight on rival Abacus Storage King, with the bid offering a clear signal that private credit sees the storage sector as valuable and strategic.

National Storage REIT announced the consortium is offering $2.86 per share, which is just over 10 per cent above its net tangible assets.

Founder and chief executive Andrew Catsoulis has made no secret this year of the fact that he believes his company has been undervalued by the ASX, as it trades below its NTA of $2.58, and any deal was always only expected to get his backing if it was well above the NTA level.

On Tuesday, shares of National Storage REIT closed at $2.26.

The situation is symptomatic of what is happening across the broader ASX, where the share prices of well run, strong earning companies are lagging, because passive index funds favour scale and key investment thematics.

Macquarie Asset Management is now carrying out exclusive due diligence to buy Qube Holdings for $9.2bn and most expect that the business will be privatised because the logistics group was undervalued by the listed market.

GIC with Brookfield have been talking to National Storage REIT for some time, negotiating on a transaction and undertaking some limited due diligence after making some earlier proposals.

Brookfield - the prolific Australian investor that bid $16bn for Origin Energy two years ago before walking away from the target - is understood to have had funds it needed to deploy within a certain timeframe, which may have been a motivating factor for the offer.

Singapore sovereign wealth fund GIC is also a major deal doer in Australia but is conservative and may have gained comfort bidding with another party.

The bidders have now been granted exclusive due diligence until December 7 to work towards a binding proposal.

Advising National Storage REIT are investment banks Citi and JPMorgan and Deutsche Bank and Jefferies are advising the bidders.

It comes after Public Storage and the business interests of Nathan Kirsh, Ki Corp, recently bid for its rival, Abacus Storage King, offering $2.3bn but then Public Storage withdrew.

Some now speculate about what GIC and Brookfield do with the 10 per cent holding National Storage REIT has in Abacus Storage King if they buy the company, and may eventually also try to buy that business further down the track as well.

Storage assets have been seen as one of the more resilient asset classes in a downturn for the real estate sector, with low operating costs and strong profit margins.

National Storage is Australasia’s largest self-storage provider, with about 94,500 residential and commercial customers and more than 270 storage centres across Australia and New Zealand.

The company has been a perennial takeover target.

The largest self storage operator in the US, the $US48bn New York-listed Public Storage, offered $1.9bn for the company about five years ago, but withdrew its offer at the onset of the global pandemic in 2020.

But private equity giant Blackstone also considered a bid at the time, as did Warburg Pincus and Gaw Capital.

Yet market experts played down the likelihood of an interloper in the latest National Storage REIT deal.

Public Storage is thought to be gone for good.

The play by the North American private equity firm Brookfield comes after it sold the Australian retirement living business Aveo this year for $3.85bn and purchased a 19.9 per cent stake in the $1bn ASX listed Cromwell Property Group.

GIC recently backed a deal for Invesco to buy retirement living business RetireAustralia for $845m.