Sovran Self Storage Acquisition of LifeStorage a Good Thing

Sovran Self Storage Inc SSS has agreed to acquire private self-storage operator LifeStorage for $1.3 billion. Cantor Fitzgerald’s Gaurav Mehta maintained a Buy rating for Sovran Self Storage, while raising the price target from $122 to $123. The analyst believes the acquisition is a positive move.

Acquisition To Yield Benefits

Sovran Self Storage has agreed to acquire 84 stores and purchase contracts on 3 "CO" stores. LifeStorage has assets in Chicago [25 stores], Las Vegas [17], Sacramento [1], Austin [8], Dallas [5], Houston [5], Denver [4], Los Angeles [3], Orlando [3], and one store each in Jackson, Milwaukee, San Antonio and Salt Lake City.

Analyst Gaurav Mehta pointed out that the acquisition will mark Sovran Self Storage’s entry into new markets, besides allowing the company to expand its scale of operations in Chicago.

“We view the acquisition as positive, driven by increased scale and G&A synergies, improved portfolio quality and operational upside in the 11 lease-up stores,” Mehta wrote. The company has been an active acquirer in 2016 and the acquisition of LifeStorage assets follows approximately $486m acquired or under contract as of 1Q.

The FFO per share estimates for 2016 and 2017 have been reduced from $5.45 to $5.43 and from $6.08 to $6.05, respectively.