Shurgard Self Storage Europe formed a development joint venture on May 26, 2003, with Crescent Euro Self Storage Investments SARL, an investment vehicle controlled by First Islamic Investment Bank, based in Manama, Bahrain.
Shurgard Self Storage is a Belgian joint venture which operates as the European business arm of US-based Shurgard Storage Centers, Inc., a real estate investment trust (REIT) headquartered in Seattle, Washington. The company specializes in all aspects of the self-storage industry and operates a network of over 563 operating storage centers located throughout the United States and in Europe.
The new joint venture, known as First Shurgard SPRL, will develop approximately 25 self-storage properties in Europe in 2003 and 2004. Total capitalization of the joint venture is anticipated to be approximately 147.5 million Euros ($173.25 million).
First Shurgard will be funded with equity contributions of Euro 12.5 million from Shurgard Europe and Euro 50 million from Crescent. The joint venture has also obtained debt financing of Euro 85 million provided by Societe Generale, Natexis-Banque Populaires, and Bank of America. The debt financing is a non-recourse five-year term facility and carries a floating interest rate of 225 basis points above EURIBOR.
Pursuant to the terms of the joint venture agreement, the joint venture will invest in stores developed or to be developed in six European countries: Denmark, France, Germany, the Netherlands, Sweden, and the United Kingdom.
Shurgard Europe has the exclusive right to manage these stores for a term of 20 years. Shurgard Europe will receive development and management fees from the joint venture, in addition to various arrangement fees of approximately Euro 975,000 received at closing.
Cash flow after expenses, fees, and interest will be distributed pari passu to Crescent and Shurgard Europe until each receives a leveraged 12 percent pre-tax return, then, for amounts above the 12 percent levered return, Shurgard Europe will receive a promoted interest in the partnership.
Under the terms of the agreement, on or before the fifth anniversary of the formation of the joint venture, the parties can either form another joint venture to hold the stabilized assets long-term, sell the assets to Shurgard Europe, or sell the assets to a third party subject to Shurgard's long-term management contract.
The sales price for the assets under each of the scenarios is their fair market value as determined by either mutual agreement or appraisal.
Bruno Roqueplo, president of Shurgard Europe, said, "This arrangement further demonstrates our ability to raise capital for our rapid growth, from both existing and new financial partners, and puts us in a very good position to further extend our industry leadership."
According to Patrick Metdepenninghen, executive director of Capital Markets, at Shurgard Europe, "We had a lot of interest from private equity sources, and selected First Islamic because their investment policy favors partnerships with strong real estate operating teams. First Islamic has earned a reputation with respected real estate investment trusts in the United States as being a valued partner.”
“The joint venture stores will remain a part of Shurgard Europe long-term through the management agreement, yet we have the flexibility to determine the best form of ownership of those stores when they achieve stabilization."
Asim Zafar, executive director of Asset Management and Real Estate for First Islamic Investment Bank, stated, "We have a tradition of a being a long-term partner with premier operators in niche real estate products, and we are pleased to be associated with Shurgard as they continue development of their leadership position in Europe."
Muhannad M. Abulhasan, First Islamic Investment Bank's director of Real Estate, added, "We see tremendous potential for self storage in Europe and hope to capitalize on that opportunity with this initial investment. Our agreement with Shurgard Europe is the beginning of a relationship that we believe will broaden the choices we offer to our investors to own some of the most attractive real estate investments in the world."
Macquarie Capital Partners Limited initiated the transaction and was instrumental to the parties in facilitating completion of the agreement. — (menareport.com)
© 2003 Mena Report (www.menareport.com)
