NitNeil Partners launches second portfolio following Life Storage sale

Al Harris
Published November 3, 2021

In August, self-storage developer and operator NitNeil Partners sold a 22-property portfolio to Life Storage for $228 million in a cash and stock deal. 

“The business plan was to assemble an institutional grade portfolio and connect the dots between a highly fragmented industry and one going rapidly through consolidation,” said managing principal Neil Sapra.

The portfolio featured locations in Alabama, Colorado, Florida, Georgia, Kentucky, Ohio, Oklahoma, South Carolina and Texas. Included in the recent deal was the first storage facility Sapra’s father, Val Sapra, built almost 30 years ago.

“We were very fortunate to execute and come full circle with the latest portfolio sale,” said Sapra.

A family affair

Sapra and his brother Nitesh grew up in Huntsville, AL where their father was employed as a university agriculture professor. The father came across self-storage as a place to invest his income, building the family company’s first facility in 1994 when Sapra was in high school and Nitesh was in middle school.

The Sapra brothers left Hunstville to go to college, and then into early careers working in the multifamily sector. In the mid-2000’s the brothers saw a burgeoning opportunity in the self-storage sector and came back home with a business plan to expand the family’s three-property self-storage portfolio.

Round two

Now with that portfolio sold to Life Storage, NitNeil Partners is gearing up to build a new portfolio—once again concentrated in the Sun Belt region. In fact, they’ve already started with two operating facilities, three facilities under construction, and five more slated to break ground between now and next year. The ten projects span six states (Texas, North Carolina, Georgia, Tennessee, Alabama and Missouri) and total 700,000 square feet.

The Storage Beat caught up with Neil Sapra to talk about the recent deal, the company’s future and what’s happening in the industry. Our conversation is below:

Storage Beat: Timing wise you couldn’t have picked a better time to develop and sell a portfolio, do the next several years look as promising to you as you begin building your next portfolio?

Neil Sapra: I think the industry is much more efficient today compared to the time frame we built the first portfolio. The combination of more capital, more competition and more data has caused cap rates to compress in our industry and valuations are at all-time highs. We very much think it’s a great industry, and we are excited about the launch of our second portfolio.

What headwinds do you see ahead for the self-storage industry?

There will always be headwinds. We faced headwinds between 2007 and today. Going forward, we are mostly focused on growth through development. We are facing the most recent headwinds due to the uncertainty of construction costs specifically related to a spike in the cost of steel. We expect steel pricing to normalize in 2022 but the uncertainty poses some challenges for development.   On a positive note we believe some tailwinds exists as it relates to rent growth as physical occupancies remain high.  

How did the deal with Life Storage come about?

Right around the end of 2020, there was this light at the end of the tunnel as it relates to the vaccine and maybe an end to the pandemic. Self-storage as an industry held up extremely well during the pandemic relative to other real estate asset classes such as hotels, retail and office.

For that reason, there was even more concentration of capital coming into the industry, and causing valuations to hit levels we had not seen before. That started the dialogue about exploring an exit. We’d been in industry and had our portfolio for years. We had built out our management team over the last several years, and looked at the timing as an opportunity to hit reset.

Coming into 2021, we decided to speak with a couple of intermediaries on opinion of values and ultimately selected Eastdil to market the portfolio. We were very pleased with Eastdil and Kieran O’Shea’s ability to create a competitive market for the portfolio. Ultimately, Life Storage was awarded the portfolio and was able to execute on the transaction, and they’ve been a great partner.

How did your portfolio navigate the COVID-19 situation at first?

I think we were very fortunate that our portfolio was third-party managed and we had some exceptional partners in that regard, Life Storage, Extra Space, CubeSmart and Storage Asset Management. They all did a great job and were very proactive in making the necessary adjustments to maintain operations and keep people safe. By leveraging technology we were able to move to contactless leasing options and in many ways the pandemic expedited our entire industry moving that direction.

We feel very fortunate and thankful for our third party management partners.

As you start with the second portfolio, is there any change in strategy? What learnings did you gain from the first run?

One point of emphasis as we move forward, we want to leverage off a lot of the relationships we made with the first portfolio, and execute on the new portfolio in a more efficient manner in how we finance, design, build and manage.

From a design-end perspective, our mandate and emphasis when we built a lot of the facilities in that first portfolio, especially in the last 10 years, was around design aesthetics. We had to integrate architecturally inspiring design to fit into neighborhoods and communities. That’s what we had to do to overcome a negative perception of self-storage. I think we’ve all come a long way as an industry with a lot of great developers building quality properties that overcame the stigma.

As we look at the second portfolio, we want to continue to push the envelop with design. But, I think it is important for the storage industry to think about sustainability and being more energy efficient.  I think being better stewards of the environment is an important thing, to be smart about investment decisions. Incorporating things that are good for the environment can be good for investors and partners as well.

Tell me about your brother. What do each of you bring to the table?

Nitesh is one of the managing principals of company. We have complimentary skill sets. He has done a fantastic job, and is incredibly skilled at identifying emerging neighborhoods and growth MSAs. He’s been on the front end of the growth, and really the catalyst that helped take us from a company focused on Atlanta and Huntsville, to one that pushes the boundaries to find valuable real estate in growth markets throughout the Sun Belt region. We have a very talented management team that has been a critical factor in the growth of our company.  The future looks bright.

Al Harris

Alexander Harris is a reporter covering the business of self-storage. He obtained his degree in journalism from Virginia Commonwealth University. He loves reading Elmore Leonard novels and listening to classic country music. You can call him Al.

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