DXD Capital got a nice present during the holiday season: Its new DXD Self Storage Fund I, which it launched in September with a goal of raising $50 million, garnered $12.5 million before Thanksgiving.
“We really started the capital raise Sept. 1,” said Drew Dolan, principal and fund manager for DXD, which is based in Albuquerque, NM. “The first fund you do is the hardest fund. I think it gets easier after that. A lot of first funds have a return better than second and third funds.”
DXD will use the raise primarily to invest in ground-up development of Class A, multistory climate-controlled self-storage facilities.
Las Vegas debut
The $12.5 million enabled DXD to buy a 1.7-acre land parcel on West Sahara Boulevard in The Lakes neighborhood of Las Vegas, NV, in mid-December. The self-storage investor and developer plans to break ground there in the second quarter on a multistory, 1,100-unit climate-controlled facility it expects to open in Q1 2022. Public Storage will operate the business.
DXD investors are high-net-worth or office families, Dolan said. None are institutional.
“Our investor makeup made money, and excels either in real estate or through their business. They have a percentage of assets in higher-return real estate. They’re real estate people I’ve had a relationship with for a long time,” Dolan said.
Dolan is a fan of self-storage. “This is the third recession in a row self-storage has thrived,” he said. “This recession has given it a boost like no other recession, with all the incredible things that are going on.”
Dolan noted that 15 years ago, 8% of the U.S population used self-storage; it’s 12% today. “Few other asset classes have seen that uptick in utilization,” he said.
DXD relies heavily on mounds of data, such as occupancy percentages, rental costs, and how multifamily facilities and single homes are trending, to help identify potential buys.
“We have started using data to sort out in an unprecedented scale,” Dolan said. “What we pay attention to is rate, and rates can tell you a lot of the story about how a market is performing.”
Dolan said the firm creates predictive models using past performance data for self-storage and combining it with other data sets to find markets with the strongest demand.
“We’re able to sort through an enormous amount of data flow to look for projects that can perform the best,” Dolan said.