CHICAGO—Harrison Street Real Estate Capital, a Chicago-based real estate private equity firm, has just completed a giant sale of self-storage facilities to Public Storage, a publicly listed REIT. The firm's officials say it's the largest self-storage portfolio transaction to date, even surpassing a $300 million sale earlier this year.

The portfolio consists of 43 properties in Texas, North Carolina, South Carolina, Virginia and Georgia that Harrison began assembling in 2007. At the time of sale, the 22,500-unit portfolio was over 82% occupied. The properties were owned in a joint-venture with Morningstar Properties and managed under the Morningstar Mini-Storage brand.

“The strategy of rolling up our sleeves and working to build a portfolio over time proved to be quite successful for our LP's,” says Christopher Merrill, the co-founder, president and CEO of Harrison Street. Since it was founded in 2005, Harrison has concentrated on “need-based” sectors such as self-storage, student housing and healthcare real estate that consumers use regardless of economic conditions, he adds.

“What we like about self-storage is that in good times and bad, people need storage; it always provides a good, steady cash flow.” Furthermore, even though this makes these properties very attractive to potential buyers, “it's still very much a Mom-and-Pop industry,” with roughly 60,000 properties, many locally-owned. Even after several years of consolidation, institutional investors such as REITs only own between 10% and 15% of this total. “There's still a lot of room for growth and a lot of consolidating to do.”

The firm will still have about 100 assets in the self-storage sector throughout the country left after this sale, Merrill says. And although this particular portfolio was concentrated in Southern states, “we're still actively investing in the region.”

Harrison Street, which was the majority owner, acquired or developed the assets with three of its closed-end opportunity funds, Harrison Street Real Estate Property Funds I, II and III. These funds were launched in 2006, 2008 and 2010, respectively. Recently, Harrison Street closed on the capital raise for Fund IV in the amount of $750 million within 5 months of launch.

Instant Insights /

Harrison Sells 43 Self-Storage Facilities

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