New York firm shoots for status as self-storage REIT

November 26, 2013 0
New York firm shoots for status as self-storage REIT

A New York investment firm is on the path toward becoming a publicly traded self-storage REIT.

Self Storage Group Inc. is the new name for the New York company formerly known as Global Income Fund Inc. The company’s common stock now trades over the counter under the new ticker symbol SELF; its previous stock symbol was GIFD.

Mark Winmill, president of Self Storage Group, said the company’s name was changed to better represent its holdings and its aim to become a self-storage REIT. “Over 75 percent of our assets are invested in self-storage properties,” Winmill said.

Self Storage Group must obtain federal approval to switch from being an investment firm to being a REIT.

The company owns and operates seven facilities, mostly under the Global Self Storage brand name; all of them were acquired in the past year. The facilities are in Indiana, Pennsylvania, New York and South Carolina. In total, Self Storage Group owns 3,678 units housed in 423,444 square feet.

Global Self Storage

Global Self Storage in Bolingbrook, IL

‘We Like Barriers to Entry’
The company is hunting for more acquisitions, primarily in the Northeast, Midwest and Mid-Atlantic regions, Winmill said.

“We like regions of the country that we think are under-served by storage rather than over-served. We like barriers to entry,” Winmill said.

The company plans to expand some of its existing facilities and is reviewing development opportunities. For the most part, the company is focusing on acquiring Class A properties.

Winmill declined to disclose the number of facilities his company is targeting for purchase in the coming months, but he said it plans to pay cash for future acquisitions. The cash will come from the sale of investment holdings. Winmill didn’t rule out financing some acquisitions, though.

Global Self Storage

Global Self Storage in Merrillville, IN

Room for Competitors
Nick Malagisi, national director of self-storage at commercial real estate firm Sperry Van Ness International, said there’s room for more publicly traded operators in the self-storage industry like Self Storage Group.

Malagisi said the strategy that Self Storage Group will employ “will probably be different than the Big Four. They are younger, leaner and meaner and can afford to experiment and can go after those value-add deals. They can afford to be in a B market with a Class A property.”

The four big REITs control about 10 percent of the U.S. self-storage market. Malagisi launched his self-storage career at Public Storage Inc., the largest of the four publicly traded self-storage REITs.

Malagisi said that because Public Storage and its counterparts are concentrating mostly on the top 20 metro markets, Self Storage Group and other ambitious companies can focus on smaller metro areas.

Global Self Storage

Global Self Storage in Summerville, SC

Hurdles Ahead
Aaron Swerdlin, executive managing director of the self-storage group at commercial real estate firm NGKF Capital Markets, said it’s difficult for fledgling operators like Self Storage Group to build portfolios in key markets. Still, he said, the top 10 operators are focusing on only about half of the self-storage facilities up for sale.

“If you are looking for a way to build bulk and scale, certainly going to the markets where existing large operators aren’t actively acquiring is a start,” Swerdlin said. “But then you’ve got to wonder why existing companies aren’t going to markets like that.”

Swerdlin pointed out that while operating costs are pretty much the same for self-storage facilities no matter where they are, per-square-foot rental rates vary widely, meaning the revenue potential is more attractive in top-tier markets.

Swerdlin said facility valuations are up and established operators show no signs of being less aggressive on the acquisition front in the coming year.

“If you are trying to be any kind of volume acquirer, you have to go where the top 10 operators are not,” he said. “That forces you to be that much more diligent as a buyer and more disciplined.”

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