Coro Realty is quickly expanding its foothold in the Georgia self-storage market.
The Atlanta-based Coro, a diversified commercial real estate firm that got into self-storage four years ago, recently announced four new developments in the Peach State, bringing its self-storage portfolio to six.
The four new facilities, three of which are currently under construction, are located in Columbus, Flowery Branch, Woodstock (below) and Dunwoody, Georgia. As with its current holdings, Coro plans to outsource management of the new facilities.
And Coro, whose investment capital mostly comes from domestic and foreign high-net-worth individuals, is eyeing an expansion into other southeast states in coming years, ideally in the suburbs of primary metro markets, according to Coro Realty managing partner Robert Fransen.
The SpareFoot Storage Beat recently talked to Fransen about Coro’s expansion plans, the high cost of construction today, and the state of the self-storage industry in general.
So you expect Coro Realty to expand outside Georgia?
Fransen: We do see expanding outside of Georgia. Initially, probably to adjacent states. So Tennessee. We’re also looking at the Carolinas and Florida, specifically northern Florida. Currently, our portfolio is all in Georgia. But our plan as we continue to build these is to expand through the Southeast.
How many facilities do you think you’ll be adding?
A short-term goal of 10 to 12 facilities in the next three to four years, so to break ground on two to four per year. We want to be somewhat modest in our ambitions. And then in the longer run, it depends a little bit on how well those do. But I can envision a portfolio of 20 to 30 self-storage facilities over time.
Do you see the day when Coro Realty adapts its own brand name for all of its properties?
I don’t think so. We like being an owner and we’re a developer, but I also think we know what we’re good at and what we’re not good at. We’ve had good success and been very happy with the outsourced management we’ve used. There are economies of scale that come with having a company like (ExtraSpace) — the Google search optimization, the brand name that a customer recognizes. … So I think our strategy is going to continue to be that we’ll develop them and own them. But we’ll outsource the management.
Do you see holding these facilities for the long-term or do you see selling and developing facilities as opportunities arise?
You know, the initial strategy is to build a small portfolio and then either sell or refinance. Let’s say we develop the first 10. We are building multi-story Class A, climate-controlled facilities. When they’re often occupied, those are probably $20 million to $25 million assets on average. At that point, we have a $200 million to $250 million portfolio. We would then look to either sell that to a larger group — whether it’s a public REIT that wants to own them, or maybe it’s an institution, or KKR, or BlackRock, somebody like that, that is buying up this product. Depending on where the market is, we would consider refinancing others, you know, pulling some money out and then using those funds to build more. It really kind of depends on where the capital markets are.
As you develop ground-up facilities, how has higher construction materials and labor costs impacted projects? Have you had to forego some planned construction projects due to high costs?
We have not had to drop a deal based on construction costs, but we have elected in some cases to not pursue sites because we didn’t think that the math would work. Where we are building self-storage facilities, it clearly has squeezed the yield. The yield has certainly been compressed with rising construction costs and rising interest rates.
What’s your view of the overall self-storage industry? How’s it going right now?
Operationally it’s going well. We’re not seeing the same kind of astronomical rent increases that we saw in, say, ‘21 or ‘22, coming out of COVID. Occupancy remains high. We’re still getting respectable rent growth in our properties.
Self-storage is one of the few [asset types] that you can still justify construction and you can get financing for construction. My worry is that it’s going to get overbuilt.
I do think in the next couple of years, it’s likely going to be overbuilt, which we think will compress rents and probably squeeze yields. But we’re almost looking past that. We’re building now with the idea of what self-storage looks like in six or seven years, not what does it look like in two. And in the long-term, I think self-storage is going to continue to be a product type that is very much in demand.
Jay Fitzgerald
Jay Fitzgerald has more than 20 years of experience covering business and economics for publications and online sites, with a growing emphasis on blogs, social media and podcasts.
