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Iron Mountain (IRM) Enters Sale-Leaseback Deal With Blackstone

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Zacks Equity Research
·4 min read
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Iron Mountain Incorporated IRM executed a sale-leaseback transaction with Blackstone Real Estate Income Trust, Inc. (“BREIT”) for a portfolio of 13 industrial facilities primarily located in California, northern New Jersey and the Lehigh Valley. The transaction enables the company to raise cash, while effectively maintain long-term control of the facilities through long-term lease agreements and renewal options.

In fact, Iron Mountain generated gross proceeds of $358 million by selling the 2.1-million-square-foot portfolio. Nonetheless, the company will continue to occupy these facilities per an initial ten-year lease term, with options to renew the lease for another 20 years.

Markedly, BREIT is a perpetual-life, institutional-quality real estate investment platform investing in income-generating commercial properties across the United States. It has around $174 billion in investor capital under management.

Notably, the transaction is in line with its focus on capital recycling, through which the company is monetizing non-core assets and using sale proceeds to redeploy in its faster-growing businesses, most notable being the data center segment.

Management noted that on a leverage-neutral basis, $260 million of investable capital will be made available for use through the transaction.

In the third quarter, the company sold two facilities in Washington and Southern California for $110 million, bringing its year-to-date capital recycling proceeds to nearly $120 million, ahead of its full-year target of $100 million.

Through such moves, Iron Mountain is eyeing expansion of primarily its data-center business in important markets like Frankfurt, Amsterdam, London, and Northern Virginia, which is a key long-term growth engine for the company.

Moreover, in October, Iron Mountain collaborated with an affiliate of AGC Equity Partners , a London-based global alternative asset manager, for the creation of a joint venture in order to develop and manage the fully-preleased 27 megawatt, hyperscale data center in Frankfurt.

Such steps indicate the company’s imperative of identifying alternative sources of capital to fund its growth objectives and will alleviate pressure from its balance sheet.

However, the pandemic has led to numerous shutdowns of businesses and an increase in remote-working policies across companies, resulting in a slowdown in the service activity level, thereby, affecting Iron Mountain’s service business. In fact, the company’s global service activities have declined, with a fall in new boxes inbounded as well as retrievals and re-files. These declines are likely to continue in the fourth quarter as well, thereby, hindering near-term performance.

Shares of this Zacks Rank #3 (Hold) company have lost 13.3% over the past year compared with the industry’s decline of 4.7%.

 


Stocks to Consider

Innovative Industrial Properties, Inc.’s IIPR funds from operations (FFO) per share estimates for 2020 have been revised upward by 5.8% to $5.11 over the past month. The company carries a Zacks Rank of 2 (Buy), currently. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Life Storage, Inc.’s LSI Zacks Consensus Estimate for 2020 FFO per share has moved up marginally to $5.82 over the past month. The company currently carries a Zacks Rank of 2.

City Office REIT, Inc.’s CIO Zacks Consensus Estimate for 2020 FFO per share has improved 5.3% to $1.20 in a month’s time. The company has a Zacks Rank of 2 at present.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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Life Storage, Inc. (LSI) : Free Stock Analysis Report
 
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