W. P. Carey Inc., a leading net lease REIT specializing in corporate sale-leasebacks, build-to-suits and the acquisition of single-tenant net lease properties, and Extra Space Storage Inc., a leading owner and operator of self-storage facilities in the U.S. and a member of the S&P 500, recently revealed that they have entered into net lease agreements for 36 self-storage properties owned by W. P. Carey.
The properties will be triple-net leased by Extra Space Storage for a period of 25 years. The leases include termination rights for both companies on the 10- and 20-year anniversaries, based on certain performance metrics. Commencing on the three-year anniversary, W. P. Carey also has the right to terminate the leases in the event of a sale, with Extra Space Storage retaining the right of first offer to acquire the properties.
Rent generally commences by August 2019 and increases annually by a fixed percentage plus a percentage of revenue growth. The transaction includes a large majority of the self-storage properties that W. P. Carey acquired in its merger with CPA:17, representing approximately 90 percent of its total operating self-storage net operating income.
Jason Fox, Chief Executive Officer of W. P. Carey, commented: “We are delighted with today’s announcement, which represents an innovative win-win for both companies. By creatively converting these operating assets to long-term triple-net leases, they now align well with our core investment thesis of diversification, best-in-class organic growth and minimal exposure to capital expenditures. The structure allows us to maintain our exposure to self-storage, an asset class we have invested in for over 15 years and know well. It also underscores self-storage as a potential source of additional net lease investment opportunities.
“We have great respect for Extra Space Storage, which we expect to rank among our top 10 tenants, and look forward to continuing our long-standing relationship with them.”
Joe Margolis, Chief Executive Officer of Extra Space Storage, commented: “Extra Space is pleased to announce this creative and mutually beneficial net lease transaction, and to deepen and expand our long-standing relationship with W. P. Carey. The transaction allows us to expand our capital-light growth model on 31 assets we already managed, and to add five more assets to our platform in the boroughs of New York City.”