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GuardeAqui, a private equity-backed, Brazilian self-storage company, is in acquisition talks with a few potential targets to enhance its domestic footprint, CEO Allan Paiotti said.

Backed by Equity International, the investment írm founded by Chicago-based business mogul Sam Zell, Brazilian PE írm Patria Investimentos, and a group of private investors, GuardeAqui wants to rely
on a mix of acquisitions and organic growth to reach 45-50 units by 2021, when its ínancial sponsors are likely to exit the business, Paiotti pointed out.

The 2021-expansion plan willrequire investments of around BRL 1bn (USD 320m), the CEO said,adding that part of this sum has already been used to fund the development of GuardeAqui’s current portfolio. The Sao Paulo-based company operates 15 units in eight different cities, and has four additional facilities under construction, he noted.

GuardeAqui, which keeps its ínancial ígures private, focuses its acquisition strategy on targets that own their self-storage facilities, but it does notrule out purchasing peers that lease real estate properties, Paiotti said.

The CEO stressed that it has been hard forthe company to índ targets that meet GuardeAqui’s quality standards, but pointed that the recent emergence of new players in Brazil’s self-storage industry may create more acquisition opportunities in the nearfuture.

According to the Association of Brazilian Self-Storage Operators (ASBRASS), the sectoris made up of roughly 100 players that together offer around 170,000 square meters of self-storage space. Most of these players, Paiotti noted, have no more than four units.

Other companies in the local self-storage industry include Sao Paulo-based Metroít, which owns four units and is backed by Brazil-based real estate group Grupo TRX, Chicago-based self-storage company Metro Storage and Goldman Sachs [NYSE: GS]; Sao Paulo-based Good Storage, which operates nine units and is partially owned by Brazilian PE írm Hemisferio Sul Investimentos; and Rio de Janeiro- based Guarde Perto, which has four units, as previously reported.

Guarde Perto’ shareholder Renato Rembischewski told this news service on 31 March that local M&A boutiques Premiumbravo and Galt Capital were retained to seek investors interested in buying up to
70% of the self-storage business.

Paiotti said the company has never engaged in acquisition talks with the aforementioned peers, but highlighted that nothing prevents it from eventually approaching them in the future.

Asked about the most likely exit scenario for GuardeAqui’s PE-backers, the CEO said that several options are on the table, including an initial public offering or a sale to a foreign strategic willing to enter Brazilian market.

M&A Track Record

GuardeAqui’s mostrecent M&A deal took place in January, when it acquired Sao Paulo-based peer Kipit, which had two units and was formerly backed by Patria Investimentos. As part of the deal, the
Brazilian PE írm secured an undisclosed stake in GuardeAqui, Paiotti said.

Its other ínancial sponsor, Equity International, has been on board since February 2011, when it acquired a controlling stake in the company for a consideration of USD 58m, according to
Mergermarket database. Mario Fernandez, who established GuardeAqui in 2006, leads the pool of private investors that also owns an undisclosed stake in the business, the CEO noted.

Equity International, Patria Investimentos and the group of private investors together own all the shares of GuardeAqui through a holding company, Paiotti noted.

In orderto further accelerate its expansion, GuardeAqui forged in February 2014 a joint venture with Morgan Stanley Alternative Investment Partners, which encompasses some of its self-storage units, the CEO said. In December of the same year, US-based fund manager LaSalle Investment Management made an undisclosed investment in the JV, he added.

Paiotti declined to reveal the number of self-storage facilities placed underthe JV structure, but noted that the holding company owing GuardeAqui has stakes in all of its units.

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