It’s been about 35 years since The Peterson Cos. opened a new division, and the Fairfax, VA-based real estate company chose to focus it on the fast-growing world of self-storage.
The company, born in 1965, first dipped its toes in this endeavor about five years ago, and has developed and opened three projects over 100,000 square feet each in the Virginia towns of Ashburn, Gainesville and Stafford. CubeSmart operates all three.
“We have been in the self-storage development business since about 2015, 2016, but we have done it kind of tentatively,” said Jim Mertz, who leads the new division. “We’ve now completed and have opened three projects. It seemed like the right time for the company to devote the resources to create the division.”
“We like the fact that the leases are short-term and we like the ability to respond to the market. If the market goes up, we can institute a rent increase. And we don’t have to do tenant improvements,” Metz said.
Mertz joined Peterson in 2015 and has worked on developing Promenade at Virginia Gateway, a Cabela’s store in Gainesville, and TopGolf and IFly (indoor sky diving) at Commonwealth Center.
The Storage Beat caught up with Mertz, 65. Read our conversation below.
What do you like about self-storage?
We develop all kinds of real estate: apartments, office buildings, retail, distribution centers. When we started developing self-storage, we were able to utilize the skill sets we have from doing those other developments. We learned it’s a product type that’s easy to get your arms around, not complicated to develop and once you’re developed it, operationally, it’s relatively [easy to run].
Where would you like the new division to be one year from now?
In 12 months, I know we’ll have four facilities open and operational. I would like to have another five or six in the pipeline.
What are you looking for in a project or an acquisition?
We have developed only ground-up so far. We have not purchased any self-storage facilities. That doesn’t mean that we wouldn’t. We look for situations with a value-add component, where we can go in and buy and create value, by developing, adding space, reconfiguring space. We’re aggressively looking for new sites to purchase.
What is your overview of the self-storage industry?
What we’re seeing right now, you have a lot of people who are continuing to buy things and need an opportunity to store them. It’s getting harder to develop, especially with construction costs having risen so much in the past four months. I think the metrics continue to get better and better. I think pricing is going to keep going up; inflation is hitting everything right now.
Have there been any surprising happenings?
I think the most unusual thing is one day I went out to one of our facilities and I noticed somebody had basically unloaded a truck, left it on the outside of the building and didn’t come back for it. What rights did we have to get rid of all this stuff? Were they coming back? Not coming back? They never came back, so we threw it all away.
What else would you like to add?
In terms of looking for sites, one of the things that Peterson is known for is we have a lot of relationships with municipalities and counties around us; we’re used to taking things through the entitlement process. That’s something that other developers might be afraid of going through.