GlobeSt.com: Capital and credit is constrained in all real estate sectors right now. What can Davies Ingersoll Capital Partners bring to the table to get deals done in the self-storage space? Davies: Today the only financing we are doing is in an advisory capacity, working primarily with national money center banks, regional banks and local banks. They are the ones doing the majority of self-storage commercial lending, along with life insurance companies, which are providing non-recourse alternatives. However, the life companies are lending at lower leverage levels, in general, than the banks.

GlobeSt.com: Will you offer any financing yourself?

Davies: Yes, one of our goals is to bring a debt product to the self-storage sector, just as we had at Buchanan Storage Capital, of which I was a co-founding principal, and its predecessor firm, Belgravia Capital. At Buchanan we had a dedicated self-storage CMBS program – a fixed rate program that we offered in partnership with RBC Capital. We are in early discussions with potential capital partners about this. GlobeSt.com: Are they receptive to the idea? Also, can you give me a rough idea of the size of the debt product and when it will be launched?

Davies: Yes, there is a real interest in this because of the relative safety that is inherent in self-storage lending. But it's too early to give any details about size or timing.

GlobeSt.com: Tell me more about the equity investment opportunities you want to pursue.

Davies: We have a significant group of experienced high net worth storage and non-storage real estate investors who are seeking compelling property and discounted note purchase investment opportunities.

GlobeSt.com: Are you talking about forming a fund or are these just investors interested in self-storage whom you've identified?

Davies: We will ultimately have a fund to create efficiencies in our investing. I want to stress, though, that we will not be investing as the sponsor ourselves -- we will only co-invest with best-in-class sponsor owners.

GlobeSt.com: Why self-storage as an investment opportunity right now in this market?

Davies: Typically, self-storage as a sector has fared better than other property types during economic downturns – right now, though, it's facing the greatest distress in its history. Some experts predict that 2009 will be the low point in its existence as an asset class. So while there has been little turnover or trading of properties due to the credit crisis and the bid ask spread, a number of investors believe that there are going to be good opportunities during the next 12 to 36 months -- some of which will be driven by institutional equity and lenders who will be making the sell decision.

GlobeSt.com: You mentioned the safety inherent in self-storage. Did underwriting stay under control in this asset class during the real estate market's halcyon days?

Davies: (laughs) Underwriting got out of control in every commercial real estate sector, including self-storage. But it's still a property type enjoying one of the lowest default and delinquency rates.

GlobeSt.com: Can you tell me what you have in your pipeline right now, just in terms of your advisory activities?

Davies: We currently have in process in excess of $40 million in recapitalization activity.

GlobeSt.com: Speaking of the advisory business, can you give me a sense of the size of third party funds or capital that is currently available for self-storage lending?

Davies: Lending for self-storage right now is highly fragmented and non-homogenous in terms of interest rates being offered. You might find one bank that quotes a five-year, fixed-rate at 6.5% non recourse and on the same portfolio, another bank might quote 7% fixed rate, but with recourse. It's very inconsistent.

GlobeSt.com: That's very different from how it was before.

Davies: Yes. Prior to the credit crisis there were 30 – more than 30 – lenders that would want to finance a quality storage portfolio. And their quotes would all be within a similar interest rate band. All that's changed now.