Research-Driven Investment Thesis Leads to Global Partnership

The Shurgard Europe transaction is an example where Fremont Realty Capital identified a secular trend in the United States and saw a potential market opportunity for that trend to be replicated in untapped European markets. Fremont Realty Capital thoroughly researched the self-storage business in advance and partnered with a top operator in this very successful investment.

In 1997, Fremont Realty Capital began investigating the then non-traditional real estate sector of self-storage.  Its research identified a potentially profitable opportunity in the emergent self-storage sector in major European metro markets. We explored potential investment strategies, and found a seasoned operating partner in the sector – Shurgard Storage Centers, Inc (“Shurgard”), a U.S. Real Estate Investment Trust.

After two U.S. self-storage investments with Shurgard, Fremont Realty Capital teamed up with three other investors to make an equity commitment of €122 million, subsequently increased to €150 million, to Shurgard Europe, the nascent European self-storage business of Shurgard. Simultaneously we assisted Shurgard Europe secure a €140 million credit facility, which was also subsequently increased in stages to €300 million.  The capital was used to further Shurgard Europe’s development of ground up self-storage facilities across Western Europe, establishing the company’s position as the dominant self-storage operator in Europe. 

Our strategy was to capitalize on the largely untapped market opportunity to introduce modern, consumer-oriented self-storage product to the densely populated European continent.  At the time of Fremont Realty Capital’s investment, there were over 35,000 self-storage facilities in the U.S., but less than 400 such facilities in Europe. We and Shurgard believed that Europe exhibited the same inherent self-storage fundamentals that prevailed in the United States, including very stable performance characteristics, low break-even occupancy, low risk cost structure, steady rental rate growth, low capital expenditure requirements and low functional obsolescence.

During our investment period, Shurgard Europe grew from 17 stores in three countries to over 150 stores in seven countries and fifteen major metro markets – establishing Shurgard Europe as the largest Pan-European self-storage operator.  Beyond our equity commitment we gave ongoing assistance and advice in the areas of capital formation and financing, which included two development joint ventures and a groundbreaking securitized public bond issuance, a first for the sector in the European markets. We also lent a hand to Shurgard Europe’s management in the areas of business plan development, compensation, accounting, management reporting and systems policies and procedures. 

Fremont Realty Capital exited the investment in June 2005 when Shurgard bought out its interest, resulting in very strong financial returns.