Axxcess JV Plans $1B in Self-Storage Acquisitions

NEWPORT BEACH, CA-Locally based Axxcess Capital Ventures LLC and former Universal Self Storage Acquisitions president Troy Downing have formed a joint venture to acquire self-storage properties in major markets throughout the US, with plans to acquire and hold over $1 billion in self-storage units over the next several years. The joint venture, called AC Self Storage Solutions LLC, will acquire the properties via AC Self Storage Solutions Fund 1 and will operate the facilities under the brand name AC Self Storage.

Downing, who is managing member of the joint venture and also a principal in All American Property Management Inc. in San Diego, tells GlobeSt.com that the new venture expects to close on its first deals within the next four to eight weeks. He comments on the timing of the JV: “We believe this is an excellent time in the real estate cycle to acquire self-storage properties." He explains that the $22 billion (in annual revenues) self-storage industry has been impacted by the recession and a capital shortage over the past three years. But Downing sees “a return to positive growth fueled by a slowly improving economy and Americans shifting to smaller, more affordable housing and needing more rentable storage space for their possessions." Another point that Downing makes: "Entrepreneurs launching small businesses and online marketers needing to warehouse inventory are added demand factors,” he says.

AC Self Storage will also be focusing on niche markets such as mid-sized communities anchored by military installations, resort and second-home markets where boaters and outdoor enthusiasts need secure locations to store gear, equipment and even small boats and trailers during the off season. Downing, who says that the JV expects to raise most of its investment capital from high-net-worth individuals, tells GlobeSt.com that the JV expects to acquire properties at about 55% to 60% leverage and to buy via single-purpose entities for each deal.

While AC Self Storage is a new entity, the principals in the last 10 years have managed over 40 real estate equity funds totaling more than $1 billion in equity raised and 75 self-storage properties representing $2 billion in asset value.

“In the last decade, I’ve never seen more opportunity to aggregate strong cash flow self-storage properties at such universally high cap rates,” Downing says. Cap rates generally range from about 8% to 8.5% for the properties that the new venture is targeting. Those caps look pretty good compared with the high-6% to low 7% cap rates that were prevalent for comparable product about three years ago, he points out.

The cap rates and other conditions in the self-storage sector create "a compelling mix of current income generated from potentially undervalued properties," Downing says. “In addition, debt, while difficult to secure on most properties, is available for these assets at relatively low interest rates.”

Dick Gee, chairman of both Axxcess Capital Ventures and AC Self Storage, explains the venture's investment philosophy. “Unlike most real estate investment firms, we are long-term holders of the business and the assets,” Gee says. Tim Snodgrass, president of Axxcess Capital LLC, parent of Axxcess Capital Ventures, emphasizes that Downing has been a leader in the self-storage industry. "With his history of success in this sector, coupled with our extensive real estate capabilities with both prime and value-add properties, we feel confident our joint venture of aggregating self-storage assets will set the benchmark for industry expansion over the next several years,” Snodgrass says.