January 11, 2017 / 7:02 AM / 9 months ago

Zell's Equity International, Pátria to merge Brazil self-storage units

SAO PAULO, Jan 11 (Reuters) - Real estate tycoon Sam Zell and investment firm Pátria Investimentos Ltda have combined two leading Brazilian self-storage firms in a joint venture that aims to more than double their capacity by 2020, the companies said on Wednesday.

Under their plan, the entity resulting from the merger of Zell’s GuardeAqui and Pátria’s Kipit will open 30 storage facilities in Brazil over the period, an investment that could reach 600 million reais ($187.76 million) based on the average cost to build a unit.

Each unit costs about 20 million reais to set up, Fauze Antun, real estate partner at Pátria, said in an interview. He declined to quantify the investments of each of the companies, but said that most of the funds should come from Pátria, since Kipit is the smaller partner.

With about 20 units, the joint venture will comprise one-third of Brazil’s leasable self-storage area, the partners said in a statement. The venture, which will operate under the GuardeAqui brand, is roughly 50-50 owned by the partners, Antun said.

The goal is to expand GuardeAqui’s leadership in Brazil’s fragmented self-storage market, which gained steam in last the decade on buoyant demand for housing, the companies said. Self-storage gives individuals a way to keep belongings as they move into smaller apartments and homes.

Once the venture reaches its target of opening 50 self-storage sites, Zell and Pátria will start considering a potential exit for GuardeAqui, through an initial public offering, a sale to another investor, or another option, Antun said.

While self-storage offers some of the most stable returns in real estate, the segment has remained underdeveloped in Brazil because of scarce financing, GuardeAqui Chief Executive Allan Paiotti said in an interview.

The sector has a crisis-resilient reputation due to the flexible nature of self-storage leasing contracts and the fact that corporate clients account for half of the business of GuardeAqui and Kipit, Paiotti added.

In the last few years, Brazil’s self-storage industry has attracted names such as São Paulo-based Hemisfério Sul Investimentos Ltda and U.S.-based Evergreen Investment Corp, which committed $150 million to create GoodStorage in 2013.

Also, Goldman Sachs Group Inc’s special situations unit last year provided an undisclosed amount of expansion capital to privately owned MetroFit, marking the bank’s first investment of that kind in Brazil.

Zell’s Equity International entered GuardeAqui in 2011, investing $58 million. Kipit is part of the investment portfolio of Pátria’s roughly three-year-old Real Estate Fund III.

$1 = 3.1955 reais Reporting by Ana Mano; Editing by Guillermo Parra-Bernal and Richard Chang

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