Self-Storage Investing In a Syndicated / Private Placement Deal

[Barry Dameshek]

I've mostly been an investor in multi-family and would like to enter the self-storage arena. I'm considering a private placement / syndicated deal since I don't really have the time to actively manage or oversee a project right now. I am interested to hear from those who have any knowledge syndicated deals in the self-storage space and if you are aware of any reputable operators who have exhibited solid returns for investors. I've invested in PP's in multifamily so I know it's imperative to trust the sponsor as an operator. I'm looking at a deal right now for one with the 27th largest SS operator in the country. The deal involves 10 properties with a $30MM raise from investors. Projected returns in years 1 & 2 are 4% & 6% respectively while the properties are enhanced and occupancy is increased. The preferred return for investors is 8% cash on cash and a projected 16% IRR post sale / exit, with an estimated hold of 6 years (though it sounds like historically this sponsor sells or refinances within roughly 3.5 years).

Thanks in advance for any thoughts you may have on this opportunity and syndicated self-storage deals in general.

[Taylor L.]

I recently made my first self storage syndication investment, having been a multifamily investor previously. I invested in this particular deal because I'd known the sponsor for a few years and followed their deals and progress.

#1 in all syndications, in my opinion, is the team. Experience, reputability, ethics, and things along those lines all come way before a particular deal. If that all checks out, then I'll look at a deal. Much as you've said.

As far as the returns, I would want to take a look into their due diligence and underwriting calculations to determine whether those return projections are conservative or not. I'm more interested in the business plan than the projected cash flows per year. The business plan being whether we can normalize rents, add space, add amenities, and things like that. If all of that makes sense and there's room in the market for it, then I'll move on to how that impacts the numbers.

So for this particular deal, I think you should have an understanding of what the business plan is, then move on to what the numbers say.