Why Investment Appetite Is Growing for Self-Storage Deals

Investment appetite is growing for self-storage deals. Real estate investor Gelt has entered the self-storage market in South Pasadena, near a multifamily property that it owns, and discovered a strong interest in self-storage deals because of their similar low-risk profile and outperformance compared to other asset classes during a downturn. The firm has acquired Southmark Storage, a 665-unit self-storage facility located in South Pasadena, in an opportunistic deal, and discovered the tremendous upside in the asset class during the transaction.

“Our first self-storage deal in South Pasadena was largely an opportunistic acquisition. Gelt acquired a multifamily asset a few years ago, which had been owned by the same seller,” Keith Wasserman, a partner at Gelt, tells GlobeSt.com. “We had an existing relationship through the seller’s broker and identified a quantifiable value-add opportunity to improve performance and bring rents to market. During the acquisition phase we discovered substantial appetite from our multifamily investors for an asset class with a similar low-risk profile. Our equity position was over-subscribed within a matter of weeks. In the Great Recession, self-storage outperformed other real estate asset classes and has proven to offer superior returns with low risk.”

Southmark Storage was a perfect foray into the market. It is in a great location near one of Gelt’s multifamily properties, it was nearly fully occupied at the time of the sale and it is sizable with 623 self-storage units, outdoor units and a two-bedroom apartment for onsite management. “Location and value-add potential were pivotal components in our decision to acquire Southmark Storage,” says Wasserman. “The site is located within a 30-minute drive from our Los Angeles headquarters, which has allowed us to work closely with our property manager Extra Space, who is the largest third party manager for self-storage assets in the country. As a result, we have gained extensive domain knowledge, which will facilitate our expansion into the vertical.” Gelt has hired Extra Space Storage to manage the asset.