Unpacking the takeover talk on National Storage REIT

National Storage REIT is back in the M&A spotlight, with a suitor thought to be moving towards a potential takeover.

It is understood that a party has locked in offshore funding for a bid, with some predicting the prospective buyer is likely to be either an offshore trade group or a private equity firm.

Some question whether a bid is imminent because the share price of National Storage REIT has rallied from where it was trading late last year. The market value is currently about $1.6bn and its share price is now over $2, after trading around $1.90.

There were suggestions last year that Abacus Property Group was one potential suitor after it acquired a small stake.

Like National Storage REIT, Abacus also owns self-storage properties in its $908m asset portfolio, and private equity has approached Abacus in the past about buying them.

However, some say Abacus would not be able to secure funds at the right cost for a deal to make sense, although it did raise more money than needed last year when it pursued the Australian Unity Office Fund.

Another obvious contender for the portfolio is private equity firm Heitman, which is a specialist in the self-storage field.

The Chicago-based real estate investment firm has $44.2bn in assets under its control and has 20 years of experience investing in the self-storage market.

For the 2019 financial year, National Storage REIT produced a $144.8m net profit and market analysts believe its platform remains valuable.

The company is Australasia’s largest self-storage owner-operator, with more than 60,000 residential and commercial customers at more than 170 storage centres across Australia and New Zealand.

Globally, the demand for self-storage is expanding, at a time when its yields are seen to be reasonably high in a low-yield environment.

Self-storage investments are becoming increasingly lucrative, with more people relocating for work and storage also being used after downsizing or divorce.

The sector’s relatively high yields are attractive in the context of record low yields in most other sectors.

It comes as many bet that the real estate space is ripe for deal activity this year, with the cost of acquiring an entire real estate company in many cases currently cheaper than buying the assets individually.

Major REITs have also recently been subject to speculation about tie-ups.

GPT is said to have been a target, with some suggesting last year that it was also on the radar of Mirvac, while Dexus has also considered an acquisition of the business.