10 Federal’s third self-storage fund is up and running, raising $7.4 million in 18 days and quickly acquiring three facilities in Georgia and South Carolina as part of its long-term push to become one of the top storage operators in the nation.
Brad Minsley, co-founder of Raleigh, NC-based 10 Federal Self Storage, said his company’s third fund, 10 Federal Self Storage Acquisition Company 3, also has a fourth storage facility in the Charlotte area under contract and a fifth property elsewhere in North Carolina under agreement.
The new acquisitions bring 10 Federal’s total portfolio to 59 properties under management, 47 of them owned by 10 Federal, primarily in the southeast region of the country but also in Texas and the Midwest.
Phases and stages
Ultimately, Minsley said the third fund is expected to raise a total of about $30 million, similar in size to its second fund that was launched in 2019 and ultimately closed at $32 million. 10 Federal’s first fund, launched in 2017, raised about $10 million.
If all goes well, 10 Federal expects to start a new acquisition fund about every 18 months, with the goal of eventually becoming one of the top ten or 20 storage operators in the nation, Minsley said.
“We’re taking a longer-term view towards owning facilities,” said Minsley. “Anything is possible, but we hope to just keep growing.”
10 Federal Self Storage, whose corporate parent also owns and operates 16 multifamily properties, is referred to by some as a “high-tech storage firm,” due to its heavy investments in technologies that allow it to run its facilities largely unmanned via automation.
The 200-employee company has three full-time software developers to help with both its operations and investments, Minsley said.
A steady stream of capital
The launch of 10 Federal’s third fund earlier this spring comes as the self-storage market is flooded with relatively new investors, many of whom have taken notice of the sector’s strong performance during the recent economic downturn caused by the COVID-19 crisis.
“Everywhere you turn, there’s more capital streaming into self-storage,” said Marc Boorstein, a principal at MJ Partners Real Estate Services. “It’s just been overwhelming.”
It’s not just high-profile institutional investors that have recently entered the self-storage market, such as Singapore’s GIC Private Limited and Bill Gates’ Cascade LLC. An increasing number of “family-office money,” or trusts controlled by high net-worth individuals, are getting into self-storage, Boorstein said.
As a result of all the investment money pouring into the sector, the competition to acquire facilities has become fierce, driving up sale prices and driving down cap rates in many markets, says Boorstein.
“Self-storage has been hot for a number of years, but now it’s insane,” he said.
10 Federal’s Minsley said the competition for acquisitions has definitely heated up. “There’s a lot more money out there, that’s for sure,” he said.
But 10 Federal’s technology prowess helps it when it comes to identifying attractive acquisition targets and making competitive bids for sometimes underperforming properties that can benefit from 10 Federal’s automation technology, he said.
“We tend to compete very favorably in many markets,” he said.