How does rolling up units into a larger portfolio effect the exit CAP Rate?

[Garrett Gatton]

I am currently in the process of looking at some self storage facilities to syndicate. One of the questions that has come to mind is as follows...

How does aggregating more units into a portfolio effect the exit cap rate when you go to sell? Can you charge more of a premium due to economies of scale or is there a threshold that becomes too large and overwhelming for prospective buyers?

Thoughts? Thank you!

[Tiffany Colvert]

Adding more storage units to a portfolio can increase the NOI, which in turn can increase the property's value and potentially lower the cap rate. I do think investors will ultimately look at specific market conditions and the demand for storage units in your market. If the vacancy is low, I'd say it makes sense and could be a viable option to bundle into a portfolio for greater returns.