Life Cos. Favor Self-Storage for Its Consistent Performance

High-quality self-storage properties are among the favored asset classes for life insurance companies. The Ezralow Co. has secured $364 million through four life companies for a 15-property self-storage and industrial portfolio in California. The portfolio includes 12 self-storage assets and three industrial properties

“Many life companies understand and favor this asset class due the strong performance of well-located and well-operated properties in this environment,” Peter Welsh, principal at Gantry, tells GlobeSt.com. “The fact that self-storage properties perform consistently in both growth and recessionary markets is also appreciated. It is a unique asset class in that way. People buy more stuff in a growth economy, and often consolidate and relocate in a recessionary economy, both are drivers for self-storage assets.”

The financing package included long-term and best-rate financing. Gantry secured the funding on behalf of the borrower. In addition to Welsh, senior director Paige Serden, principal Braden Turnbull and senior associate Josh Natker worked on the deal. Three of the four life companies to fund the deal were Gantry’s correspondent lenders. “To successfully achieve the desired loan terms, we surveyed the life company market using our knowledge of which lenders best understood this asset class and which currently offered the most competitive terms,” adds Welsh. “We found a strong level of interest among many lenders for self-storage loans at this time as opposed to office and retail properties which, while still financeable, present more challenges in underwriting than well performing self-storage properties.”

Due to demand in the asset class, life companies were able to meet the borrower’s loan requirements, according to Welsh, who added that the team conducted a careful selection of multiple life companies to secure the deal. “Concessions weren’t a significant  issue for these assets due to the relative strength of the market fundamentals in each of the portfolio’s sub-markets,” he adds. “Currently, borrowers should expect that with strong sponsorship, demonstrated operating history and a well-positioned asset serving its local submarket, they should be confident in a positive response from a range of life company and securitization lenders aggressively seeking portfolio diversification through investments in this desired asset class.”

Overall, capital availability among this asset class remains strong from both life companies, as seen in this deal, as well as securitized lenders. “Self-storage really came of age during the past decade as its strong performance during the last downturn proved the merits of the asset class’s fundamentals,” says Welsh. “In tandem, the quality of sponsorship and asset management has risen to the point that more financing opportunities in the self-storage sector qualify as investment -grade assets in the judgment of our lenders.“