Elite Stor Capital Partners LLC, an equity investor focused on the self-storage industry, is acquiring 17 self-storage facilities in Kentucky and another six in Ohio for $35 million from America’s Storage/Storage Rentals of America, a father/son real estate partnership created in 1995. The portfolio includes 731,875 rentable square feet of storage space in 5,825 units. The properties were about 92 percent occupied at the time of sale, according to a press release from HFF (Holliday Fenoglio Fowler LP), which represented the seller in the transaction.

“The quality of the assets within the portfolio and the economy of scale is what attracted Elite Stor Capital Partners to the deal,” said HFF Director Barbara Guffey. “The transaction aligns with its strategic growth plan and its largest portfolio acquisition to date in the self-storage space.”

Facility amenities include climate control, electronic gate access, onsite management, vehicle parking and video cameras. Elite Stor plans to institute new management and upgrade the properties, adding modern technology and other features, according to a press release.

"Over the last 12 months, our company has increased its portfolio investments from five properties to 35 properties, and this transaction was critical to our company's continuing growth plan,” said Elite Stor CEO Benjamin Macfarland.

Elite Stor received a $26.2 million commercial mortgage-backed securities (CMBS) loan to make the purchase. Terms of the 10-year loan include a 9 percent debt yield, 75 percent loan-to-value, a spread of 205 basis points over 10-year swaps, and three years of interest-only payments followed by a 30-year amortization schedule, according to the release. The financing was complete in 47 days.

Funding was provided by New York-based Greystone, a real estate lending, investment and advisory firm. Greg Krafcik, the firm’s managing director, was the loan originator. It was the company’s first loan transaction in the self-storage industry, the release reported.

"The appetite for CMBS is ripe for a number of asset classes, so we will likely be seeing an increase in this type of loan execution throughout the year,” said Rob Russell, head of production for Greystone's CMBS team.

Greystone is a financial-services and private-investment group whose original core business is multi-family real estate lending. Over the years, the company has added related business lines including the acquisition, development, and management of multi-family housing. With offices nationwide, it’s active in healthcare, mortgage finance and real estate.

Elite Stor is a real estate investment company focused on the acquisition of self-storage properties as well as direct-equity investments with developers and operators. It’s an affiliate of Calidus Holdings LLC.

America’s Storage/Storage Rentals of America is headquartered in Danville, Ky. The company’s facilities include features such as drive-up phone centers and customer-service windows. The father and son who own the business have a background in customer service and marketing. They’ve developed, owned and operated the entire enterprise in-house, according to the HFF press release.

HFF and HFF Securities LP are owned by HFF Inc. The firm operates out of 22 offices nationwide.

 

Marcus & Millichap Real Estate Investment Services Inc., a commercial-property investment firm, will host a live “Self-Storage Market Webcast” on April 16 at 1:30 p.m. ET. The broadcast will provide an overview of the industry in 2015, including an economic outlook and trends to watch as well as a discussion on sales, pricing and financing.

Presenters include Marcus & Millichap executives Richard A. Bird, vice president and national director of the firm’s National Self-Storage Group; John Chang, first vice president of research services; and William E. Hughes, senior vice president of Marcus & Millichap Capital Corp. Kenneth E. Nitzberg, chairman and CEO of Devon Self Storage, will also participate, according to a press release.

Interested parties can register online. There is no cost to attend.

Marcus & Millichap has nearly 1,500 investment professionals in offices throughout the United States and Canada. The company closed more than 7,600 transactions in 2014 with a value of approximately $33.1 billion.

Update 4/27/15 – National Storage Affiliates Trust (NSA) announced that its IPO of 20 million common shares will be priced at $13 per share. The effort could raise $260 million, which the real estate investment trust intends to use, in part, to acquire 21 self-storage properties. NSA also confirmed that underwriters will have a 30-day option to purchase up to an additional 3 million common shares.

The IPO is expected to run through the New York Stock Exchange and close on or about April 28, according to a press release.

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4/15/15 – National Storage Affiliates Trust (NSA), a Maryland-based real estate investment trust (REIT) specializing in self-storage, has launched an initial public offering (IPO) of 20 million common shares at between $15 and $17 per share. The company has also granted underwriters a 30-day option to purchase up to an additional 3 million common shares. The IPO has been approved for listing on the New York Stock Exchange but is subject to official notice of issuance under the NSA ticker symbol, according to a press release.

NSA intends to use the funds to acquire 21 self-storage properties, repay debt, and pay general corporate and working-capital expenses, company officials said.

An initial report on the IPO filing with the Securities and Exchange Commission (SEC) in February said the IPO would be for $100 million, but based on the number of shares and pricing announced by NSA, the offering could raise more than $300 million.

Jefferies & Co., Morgan Stanley and Wells Fargo Securities LLC will act as joint book-running managers on the deal. KeyBanc Capital Markets Inc. will act as lead manager, while Baird, Capital One Securities Inc., RBC Capital Markets and SunTrust Robinson Humphrey will act as co-managers, according to the release.

A registration statement relating to the securities has been filed with the SEC but is not yet effective, NSA officials said.

The REIT was previously referred to as National Storage Affiliates based in Colorado. The company was formed in July 2013 by affiliated self-storage operators Northwest Self Storage, Optivest Properties and SecurCare Self Storage. It has since added Irvine, Calif.-based Guardian Storage; Addison, Texas-based Move It Self Storage and Chandler, Ariz.-based Storage Solutions as affiliated partners.

NSA is a self-administered, self-managed REIT with 225 self-storage facilities comprising 12.4 million net rentable square feet. The company is owned by its affiliate operators, who are contributing their interests in their self-storage assets over the next few years as their current mortgage debt matures. The company intends to expand its footprint to more than 245 facilities and 14 million square feet by the second quarter of 2015, according to the company website.

By David Blum

Some of the hottest areas for self-storage development these days are in Latin American countries including Brazil, Chile, Columbia, Mexico and Peru. Though many projects have been completed over the last few years, the market is seeing tremendous growth. Case in point: 25 new facilities are slated to open this year in Brazil. Compare this to the total number of facilities—100 in all—built in the country up through 2013.

Even still, ignorance of the storage product is still the predominant challenge—not just customer ignorance, but the ignorance of bureaucrats who deal with zoning and building permits. Some of the difficulty comes with explaining what storage is and what it can provide for the country’s residents, since there is very little frame of reference. In addition, industry-specific building regulations and ordinances are non-existent, and the site-selection process is nothing like it is in the United States.

These are the big obstacles being faced by developers in Latin America, but some local operators have found ways to overcome them.

Site Selection

Finding land or buildings that provide good visibility and ease of access and are priced appropriately is the No. 1 challenge to developing a new self-storage facility in any Latin American country. Narrow roads, poor urban planning and lack of supply makes development a tough process.

“The problem we have found are the extensions of land required for the construction of storage projects,” says Alfredo Ramirez, owner of Comimex Group, a Mexico City-based real estate and development company. “Often, the difficulty is to get land with good exposure, on a main road, with [a] good front. The street needs to allow for wide access for trailers, but mostly, the price of [the] land or warehouse [makes it] difficult to [have a] productive business.”

Zoning and Building Requirements

Once a site is chosen, the next hurdle is determining which municipality or entity to approach for approval. For example, in Lima, Peru, each neighborhood has its own “mayor,” as well as its own zoning and building requirements. In Brazil, each state and city piggybacks on a national set of codes.

Timing can be a nightmare. Reviews and final approvals can take up to a year. The process is much more complicated if you’re pursuing ground-up construction vs. conversion of existing structures. One strategy many we’ve found helpful is to schedule a visit with the local building and zoning departments to get a reading on their “temperature” for a potential project. It helps to know their familiarity with the product, too.

For example, while developing Para Guadar Self Storage in Manaus, Amazonas, Brazil, one of our first stops was a visit with the local zoning department. Fortunately, the city official we met was aware of GuardeAqui Self Storage in São Paulo. He liked the concept and design and wasn’t opposed to our proposed development. Other than a minor concern over the amount of coverage our mezzanine could use (60 percent at first, but later bumped to 100 percent), the project went very smoothly.

However, it still faces some bureaucratic issues. Para Guadar opened in December 2013, employing the largest billboard sign in the city. To date, the operator has yet to receive a permit for the sign.

“The difficulties, which I fear are not uncommon in Brazil, are about bureaucracy—the long, dragging process of getting the permits, the endless paperwork and so forth, mostly pertaining to the approval of permits and licenses,” says Rodrigo Coelho, who’s developing Guarde Legal Self-Storage in Pertolina, Pernambuco, Brazil. “On the other hand, there's no legislation regarding self-storage, which makes it so much harder.”

Government Ignorance

In Peru, self-storage is a big unknown; hence, it’s misunderstood and misinterpreted by authorities, making it difficult for developers to secure permits for projects, says one developer who wished to remain anonymous. He owns of a real estate company that’s developing local storage facility. “There is no zoning for self-storage, and unless you settle for an industrial site, you’re likely to enter into a lengthy debate with authorities without having a definitive outcome,” he says.

The key issue to address is whether self-storage is an industrial or commercial use. For this particular project, the developer had to relay information about the impact on the urbanscape, environment and traffic congestion, the required number of parking spaces, health and safety regulations for employees and customers, fire regulations and more. “These are all non-issues or easy to address in the U.S., where the business is commonplace.”

The developer decided to take the risk and bought a centrally located site with commercial zoning, which is the same for shopping centers. It then took more than a year to get the project approved. “However, there are no norms, and each municipality is different,” he says. “There is no guarantee that approval will be obtained within an agreeable period.”

On the Upside

Although there are many challenges to developing self-storage in Latin America, there are also successes. Panama, for example, has perhaps the most lenient zoning and building codes on the continent. The low barriers to entry have allowed rapid expansion of self-storage in the country, which has a population of about 1.3 million. Though absorption has been relatively strong, rates have consistently remained on the lower range of the Latin market spectrum.

This summer, São Paulo officials instituted a new master plan, calling for increased development within 400 meters of a train or metro corridor, or 200 meters of a bus corridor. Within these zones, new buildings can be taller, and mixed-use developments will be encouraged. The new plan also recognizes areas that can be zoned for self-storage and addresses a more reasonable parking requirement. This can be a huge step in improving the process for future storage projects in the city. It’s also expected that other Brazilian municipalities will follow suit.

Though some significant challenges exist, patience can generate high yields. It also helps to navigate these high barriers to entry, which, for developers with an appetite for overcoming obstacles, can be rewarded with better than average returns.

David Blum owns and operates Better Management Systems LLC, a consulting practice he launched in 2003 to assist self-storage professionals worldwide with issues of feasibility, development and management. He’s worked in Europe, Greece and Israel, and currently has clients in Mexico, South America and the United States. Since entering the storage industry in 1996, he’s worked as a district manager for Storage USA and vice president of operation for Budget Mini-Storage in South Florida. He helped co-found the Florida Self-Storage Association in 1998 and is a frequent contributor to industry publications. He can be reached at 954.255.9500 or [email protected].

New Mexico Gov. Susana Martinez signed an update to the state’s self-storage lien law on April 9 that enables storage operators to e-mail tenant-default notifications and conduct lien auctions online. Unlike lien-law bills that have passed in some other states, the final version of Senate Bill 311 doesn’t include a provision allowing operators to place public notifications of lien sales in media other than a local newspaper. That portion of the bill faced stern opposition from the New Mexico Press Association.

Storage operators must still publish public notices of lien sales once a week for two consecutive weeks in a newspaper of general circulation in the county where the self-storage facility is located. If no local newspaper is available, operators must post advertisements in at least six conspicuous places in the neighborhood around the facility at least 10 days before the auction.

The final version of the bill passed the senate and house unanimously. The updated law was lobbied by the New Mexico Self Storage Association and national Self Storage Association.

In addition to enabling e-mail notifications and online auctions, the new law also allows self-storage operators to have vehicles towed after default reaches 60 days.

Provisions seeking to place a maximum value of stored contents based on value limits expressed in rental agreements, as well as late-fee assessments equal to the greater of $20 or 20 percent of monthly rent, were also removed from the bill approved by the legislature and signed by the governor.

DBox Storage Inc., a startup business specializing in valet self-storage services, recently launched in Vancouver, British Columbia, Canada. The company uses an online platform that allows customers to schedule free item pickup, maintain an image catalog of belongings, and schedule delivery of items to their home.

Similar to other valet-style storage operators, DBox offers by-the-bin storage targeted at residents who live in dense urban areas and don’t have adequate home storage. “Valet storage has become an international phenomenon in many of the world’s metropolitan cities,” Patrick McLaren, co-founder, said in a press release. “In recent years, London, New York, Seattle, Hong Kong and Toronto have all seen many valet-storage companies pop up because it’s an extremely convenient and affordable solution to the accelerating issue of limited storage in high-density living spaces.”

DBox customers pay $7.50 per standard bin per month, $5 per month per filing box and $20 for oversized items or a standard wardrobe box. Belongings are stored in a secure warehouse in Vancouver. The delivery fee is $18, plus $2 per box or oversized item. The company will typically return items in 24 hours, according to its website.

McLaren and co-owner Jeffrey Cheng launched DBox after seeing valet-storage businesses during a trip to Hong Kong. “When we saw how successful valet storage is in major metropolitan cities, we couldn’t believe it wasn’t being done in Vancouver,” Cheng said. “It’s an ideal place for [this type of business] because our population is expanding rapidly, and we have nearly the highest amount of condo construction in North America.”

City officials estimate Vancouver will have an influx of 1 million new residents during the next 30 years, according to the release. “As the city grows denser, a fundamental shift in living space will occur and already has,” DBox officials said in the release. “People are living busier lives, and they want to live downtown, in the heart of the action and close to transit. Naturally, living spaces are smaller and new developments often have limited storage.”

McLaren and Cheng are both entrepreneurs. McLaren has been a co-owner of a restaurant in China, and Cheng owns 6Pack Indoor Beach Centre, a facility that offers beach sports and activities year-round to Vancouver residents.

DBox joins European-based SpaceWays in offering valet storage in Canada. SpaceWays serves the Toronto market in addition to its presence in Chicago, London, Paris and Sydney.

Gallacher Development LLC recently purchased North Tahoe Self Storage in Tahoe Vista, Calif., from a private investor who built the facility in the early 2000s. The property at 590 National Ave. is near the northern end of Lake Tahoe. It’s comprised of 17,785 net rentable square feet of storage space in 205 units.

“This facility is a fantastic addition to our expanding portfolio. We look forward to implementing a multiple set of options provided by this site,” said Kelly Gallacher, co-founder of Gallacher Development.

The company also recently purchased a 3.1-acre land parcel in a suburb of Indianapolis on which it intends to build a new self-storage facility. The site will include approximately 68,000 rentable square feet of storage including a two-story, 28,000-square-foot, climate-controlled building. The project, which is expected to open this fall, will be managed by Extra Space Inc.

Bobby Loeffler and Tyler Skelly, self-storage specialists with The Loeffler Self-Storage Group (LSSG), represented the buyer and seller in the transaction. LSSG is a commercial real estate brokerage firm specializing in self-storage properties throughout the West.

Gallacher Development is based in Granite Bay, Calif. Kelly Gallacher has more than 20 years of experience in the acquisition, development, disposition, financing and management of self-storage properties. He’s also a managing partner in Storage Galleria, a group of self-storage veterans who partnered to create a better customer-service experience for storage tenants. Facility owners who sign up with the company receive periodic PDF fliers of specials and discounts that they can distribute among their customers. The offers are from national companies that provide various products and services tenants regularly use.

Old Barn Self Storage in Grass Valley, Calif., which celebrates Father’s Day each year by placing “Happy Art” features on the facility’s hillside facing Highway 20/49, has chosen two pieces of artwork to display this June and is seeking additional submissions from the community for future displays. The artwork is visible on the freeway between the Dorsey Drive and Idaho Maryland Road exits, according to a press release.

One of this year’s featured works congratulates “Dads & Grads,” while the second depicts a man and a boy fishing in a boat. “They evoke the role of fathers in education and in binding the family together across generations,” said Stephen R. DeSena, managing partner.

The self-storage business has honored fathers with hillside artwork for at least five years, according to the release. “We believe that fathers who work hard to support their families and raise their children are part of the foundation of a healthy society and deserve recognition,” DeSena said.

Old Barn is soliciting community entries for future celebrations until May 15. The company will post submissions on its website and enable visitors to vote for their favorites. The winning entry will be turned into an 8-by-8-foot “Happy Art” feature for a future Father’s Day, and Old Barn will donate $250 to a nonprofit organization selected by the winner, according to the release.

Storage Choice will soon begin construction on a six-story, 130,000-square-foot facility in downtown Dallas. It will be in the Dallas Farmers Market area between Canton Street and Commerce Street, next to Interstate 45.

The facility, which will include 1,000 climate-controlled units and wine storage, is slated to open in the first quarter of 2016. “We are very excited about this property and its location,” said Paul Glover, vice president.

Founded 20 years ago, Storage Choice is a family-owned self-storage company. It operates 12 facilities comprising 1 million square feet in Dallas/Fort Worth, Texas, and Houston.