Investing money is a tricky venture. You can do your homework, make your projections, and come up with some scenarios as to how the market is going to play out, but the fact of the matter is the market is a fickle master that is hard to predict. So when an investment can be identified that is more reliable, i.e. recession proof, than others people become interested.
More and more that is the view that people are beginning to have on the self storage industry, that is a recession proof investment and as close to ‘safe’ as you can get.
“…We’ve entered unchartered territory for self-storage valuations,” within the last couple of years, said Terrell Gates, chief executive of Virtus Real Estate Capital, an Austin-based real-estate investor.
If some recent activity in the industry is any indication the perception of the industry as an investment is likely on the rise.
Storage Post and Heitman LLC recently purchased 14 self storage facilities in the New York metro area for around $300 million from Acadia Realty Trust. What has surprised some is not the price that was paid, but the capitalization rate or cap rate.
The cap rate is an indicator that tells an investor what a property yields. You get the rate by taking the net income of the property and dividing it by the price of it. Not even a year ago the cap rates were on the higher side for the self storage industry. The cap rate for this transaction is 5.5 percent.
Storage Post and Heitman LLC are not the only companies getting into the self storage industry while it is still hot. The BSC Group, LLC, in Chicago has been busy over the last year executing loans and acting as a financial advisor for many within the self storage industry.
In fact, in 2012 the company experienced its most successful year to date with 36 transactions on 73 properties valued at more than $176 million.
“We are obviously very pleased with our firm’s performance,” said Shawn Hill, principal of The BSC Group. “And we are particularly grateful to our loyal customers who appreciate the value we bring and trust us to guide them through what can be a very complicated process. We have a relationship focus and that is paying off.”
To make things even better, that success has spilled over into 2013 for BSC. So far it looks as if the company is going to close on $45 million in transactions and will have another $79 million in development.
In the broad scheme of the financial market and in comparison to other industry the numbers mentioned in regards to the self storage industry are not much, but when you consider that they are representing an industry that is constructed primarily of small business owners it is something else.
“2012 Record Year for Self-Storage Advisor The BSC Group.” PR.com; 26 February 2013.
“Self Storage Gains Cachet as Values Rise.” Wall Street Journal; 19 February 2013.