Madison Capital Group has created a new affiliate to pursue what it hopes will be a lucrative extension of its self-storage business: stand-alone storage facilities exclusively for boats, RVs and other vehicles that owners don’t want to park in their driveways.
The Charlotte, NC-based firm, which has developed or purchased more than 70 self-storage facilities since its founding in 2013, says it now has more than 10 deals in the pipeline to buy or build new storage complexes for boats and RVs, via its recently launched BlueGate Boat and RV Storage.
BlueGate announced the closing of one of those deals Nov. 22: the purchase of The Boat Rack in Nashville, TN. The facility, built in 2012, features 234 storage spaces and 108,000 net rentable square feet.
“This acquisition presents a unique opportunity for BlueGate as we start to scale this new platform. We will continue to look for assets like this while also continuing our development strategy that targets the Boat & RV sector, said CEO Ryan Hanks in a statement.
Hanks add that the company has three other deals progressing in the Nashville market.
A place for ‘Covid toys’
Madison Capital can partly credit the COVID-19 outbreak for its new venture – and the infusion of trillions of dollars in federal pandemic-era assistance into the economy since the start of the pandemic. Sales of boats and RVs have soared over the past 18 months, with many Americans choosing to spend heir federal-grant dollars on so-called “Covid toys.”
“We think we’re on to something big,” says Neil Dyer, director of acquisitions and development for Madison Capital. “This is a whole new subsector of self-storage.”
If all goes well, BlueGate is aiming to invest more than $100 million in the emerging storage subsector by the end of 2022, initially focusing on Sunbelt states. In the process, Madison Capital would also establish itself as one of the early pioneers of large-scale ownership of storage facilities focused on boats, RVs, delivery vans, food trucks and other commercial vehicles, as well as possibly antique cars.
Boat and RV storage takes off
Stand-alone facilities for boats and RVs have become the talk of the investment community in recent months, according to Jeffrey Adler, vice president of Yardi Matrix.
“This is not a surprise,” Adler says of Madison Capital’s new BlueGate venture. “The sale of boats and RVs have recently skyrocketed, so this sounds like a good bet. It’s certainly a kind of bold move.”
Storage lots for boats and RVs are not new, but they’ve mostly been confined to small-time operators and they’re not available in many parts of the country. Some self-storage operators have also long offered paid parking for boats and RVs, as a sort of add-on, on-site complement to their other offerings.
Marc Boorstein, a principal at MJ Partners Real Estate Services, agrees that the boat-and-RV storage concept has “really taken off” over the past year, with an increasing number of investors expressing interest in buying existing facilities or developing new ones.
“It’s certainly a growing trend in storage,” he said, adding most boat-and-RV facilities he knows of are part of larger self-storage sites, not stand-alone operations.
A concept in the making
Madison Capital’s Dyer said his firm has actually been talking about the boats-and–RV concept for about three years now, well before the pandemic.
The company’s traditional Go Store It business had lost some of its boat and RV customers due to expansion of its self-storage buildings at various sites. The storage of boats and RVs were previously located on vacant land, often behind or to the side of existing self-storage buildings, he said.
“That started us thinking about the parking side of storage,” says Dyer.
The recent surge in boat, RV and other “COVID toy” sales merely confirmed that there’s a strong and growing demand for larger-vehicle storage, Dyer says.
Among the deals in BlueGate’s pipeline are new facilities in Nashville, Charlotte, and in central and coastal Florida – or in states where Madison Capital has many of its more traditional Go Store It facilities. The goal is to first expand across the Sunbelt and later, if all goes well, nationwide, Dyer said.
Building a scalable, sustainable business
BlueGate will generally offer three types of vehicle storage: Fully enclosed storage, canopy storage (similar to car ports), and open-air parking storage. Vehicles will be provided with electric hookups, dump stations (for bathroom waste), water and ice services, and wash stations. One day, BlueGate may offer vehicle maintenance services as well, Dyer says.
The “sweet spot” size of each vehicle port would range from 12 feet by 30 feet to 14 feet by 60 feet, according to Dyer. Rental prices will not exceed those of regular self-storage, Dyer said.
A key to success is finding the right locations – and locations with enough land. Boat-and-RV storage sites will require between 7 to 20 acres of land per facility in order to store 200 vehicles or more, Dyer says.
Madison Capital is funding the BlueGate venture via private partners, not institutional investors, says Dyer, who declined to identify the partners. One day, it may well accept institutional funding after a successful “proof of concept,” Dyer says.
“Our goal and model is to build a scalable and sustainable business,” he says. “We’re very bullish on this space.”
