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What Makes Self-Storage So Darn Sexy

Move over multifamily. There’s a new supermodel walking the runway and her name is self-storage. (All her dresses are from boxes people put in storage.) One Austin deal helped illustrate three facts about this hot sector.

1) Race to Buy

What Makes Self-Storage So Darn Sexy

Reliable cash flow and the low overhead associated with the operations make self-storage very attractive, says Marcus & Millichap national self-storage group's Brandon Karr. Bloomberg Markets even named the four publicly traded self-storage REITs as its favorite alternative investment. Brandon says his recent sale of the 78k SF Your Storage Solution in North Austin is a good example. About 15 potential buyers put in bids. Brandon repped the private seller and the buyer, a publicly traded REIT.

2) Hot Austin Market

What Makes Self-Storage So Darn Sexy

Brandon tells us Austin is one of the most desirable markets in Texas for self-storage, and this 772-unit deal at 12506 N Lamar Blvd provided the buyer with a stable income stream right out of the gate. With the REIT’s management experience and expertise, there’s also opportunity for increasing occupancy and revenue. In 2013, Austin self-storage asking rents climbed 4.7% to $136/unit for climate-controlled facilities like this one. Operators will increase climate controlled rents 4.5% this year, Brandon says. (We're one sweat-drenched t-shirt away from just living in a climate-controlled unit.)

3) Rockin’ the Rates

What Makes Self-Storage So Darn Sexy

The escrow process took five months because the buyer had to assume the existing CMBS loan, Brandon says. The property was sold at a low cap rate based on the trailing 12 month net operating income. The loan comes due in 2023 and has an interest rate in the low 4% range, he tells us. Away from work, Brandon likes to hit the links with his wife, Bridget. They’re trying to indoctrinate their 2-year-old son, Stevenson, into a love of the game, too. He’s already adept at pulling the pin out of the hole.