NGKF Capital Markets’ Aaron Swerdlin: Self-storage real estate market ‘shines’

December 17, 2013 0
NGKF Capital Markets’ Aaron Swerdlin: Self-storage real estate market ‘shines’

2013 has been a banner year for veteran self-storage broker Aaron Swerdlin. He joined NGKF Capital Markets earlier this year as the leader of its new national Self Storage Group, and he just wrapped up one of the biggest real estate deals of his career.

On Dec. 12, NGKF announced it had completed the sale of 36 self-storage properties for $326.2 million on behalf of Private Mini Storage and Clarion Partners LLC. Self-storage REIT CubeSmart LP bought 35 of the facilities in tandem with new joint venture partner Heitman LLC, a real estate investment management firm.

The deal represents the second-largest self-storage portfolio acquisition of 2013 and the third-largest ever. The portfolio spans 28 facilities in the Houston area, seven in the Austin, TX, area and one in Charlotte, NC. Total rentable square footage: 2.1 million.

The greatest challenge is that there are more buyers than sellers.
— Aaron Swerdlin, executive managing director, NGKF Capital Markets

Swerdlin brokered the deal with NGKF colleague Kenneth Cox. Swerdlin came to NGKF earlier this year from competitor HFF LP, where he led that firm’s self-storage practice.

The Storage Facilitator spoke with Swerdlin about the Private Mini Storage sale, his new job at NGKF, his goals for NGKF and the market for self-storage acquisitions.

Take us behind the scenes. What was it like to broker the Private Mini Storage deal?

Fun and rewarding. The market obviously is fast-paced right now, so any deal, regardless of size, leaves little room for error and requires an incredible deployment of resources. But to manage a 36-property transaction—all the moving parts, the property tours, the finite nuances between assets, the questions from 50-plus potential purchasers—it’s a lot. And to have it all happening 36 times, at the same time, it’s certainly more intricate than a typical deal. But our client was extremely pleased throughout the process and with the end result, so at the end of day, Kenneth and I are extremely proud of the transaction on a multitude of levels.

Why did NGKF create a group for self-storage?

The firm is one of the pre-eminent service providers in the commercial real estate intermediary business. Anyone who holds that position should have all product types covered, so it was a no-brainer for NGKF to formalize its focus on self-storage. They have done deals in self-storage space over the last several years. To kind of formalize the dedication to the product type was a natural fit and the next step for NGKF.

What appealed to you about your new position and the opportunity with NGKF?

At a high level, being a part of a company owned by BGC Partners and affiliated with Cantor Fitzgerald and CCRE (Cantor Commercial Real Estate), the potential seemed limitless. And that very wide bandwidth of possible executions and access to data on behalf of clients is just such a huge value proposition that I knew it would resonate well with the market.

Private Mini Storage

A Private Mini Storage facility in Houston that’s now owned by CubeSmart LP

What are the greatest challenges you expect to face in your new position?

The greatest challenge is that there are more buyers than sellers. So, it comes down to product, and it’s sourcing the product that’s always the biggest challenge. Over the last 10 years, and especially over the last five to six years, the product type’s acceptance with institutional capital has accelerated at such a greater rate than any other product type. We are probably in a position where for a while, we’re going to have more buyers than sellers because we just have more capital looking for deals than we have capital looking to exit deals. You go through cycles, and that’s just to be expected.

What are your goals at NGKF, and what do you plan to do for the company’s new self-storage group?

What separates us from anyone else in the business is that our knowledge of the product type is unequaled. Between Kenneth and me, we have more than 35 years of exclusive focus within the self-storage universe and billions of dollars worth of transaction experience.

As we communicate that to our existing clients and to future clients, we will attract at least the opportunity to pitch all the major deals. That’s the goal—to be in the mix on all the big deals, apply our product type expertise, our capital markets expertise and unequaled and unparalleled knowledge to every potential transaction. There are multiple sales and transaction professionals within NGKF that have done self-storage transactions in the past, so we’re consolidating that knowledge and experience.

What changes do you anticipate over the next few years for self-storage acquisitions?

It’s going to be capital-driven. As we see new capital sources come in, they’re not new in the sense of the way that they’re structured but they’re new in that there’s a greater volume of institutional kind of first-time investors in the product type. The product type has proven itself.

Over the past 20 years, it’s the No. 1 performer, based upon total return to investors, of any product type in the REIT world. That kind of consistent out-performance has muted the concerns that many had early on about the product type and the nuances that are different than other types like office, retail, industrial and multihousing. We’re no longer apologizing for our product type like we did 15 years ago. The product type does not suffer by comparison. It shines by comparison.

How does NGKF plan to compete with self-storage players in commercial real estate that have been around longer?

In the transaction business, time is a commodity. Knowing where to spend the time to get the greatest return is the key. I am extremely confident in our ability to identify where to spend our time to get the greatest return and, more importantly, I am confident we know how to determine where not to spend our time.

 

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