Private real estate firms seem to have little trouble raising investor funds for self-storage ventures.
Two separate firms have recently closed funds exceeding $50 million in new capital for self-storage development and acquisition activity.
Albuquerque-based DXD Capital, a self-storage investor and developer, announced the closing of its inaugural fund focused on developing new facilities. The fund launched in November 2020. The company exceeded its goal by raising $53 million.
“Over the past several years, we’ve seen the growth of mainstream investment in self storage, we are in the early stages of self storage being an institutionally accepted asset class like office or retail,” said Drew Dolan, DXD Capital principal and fund manager, “Exceeding our fundraising goal in this initial fund confirms the belief in our strategy and the asset class.”
Dolan said that in the face of inflation, the steady and predictable cash flows provided by self-storage make it an attractive investment.
“We invest using proprietary technology-driven efficiency tools. Our decisions are further supported by strong market fundamentals in major US markets and submarkets that we expect will allow us to deliver outsized returns to our investors,” Dolan said.
To date, DXD has invested $10.1 million to develop new climate-controlled facilities, with one each in Phoenix and Las Vegas under construction. The fund has 12 additional projects lined up across many states including Florida, New Jersey, Rhode Island and Florida, The fund also has purchased a land parcel in Kapolei, Honolulu, Hawaii for a joint venture with InSite Property Group.
HPI exceeds fund target for development and acquisition vehicle
Meanwhile, HPI Real Estate Services & Investments, based out of Austin, TX, has closed funding on its third national self storage investment fund. The fund closed with a total of $66 million raised.
“With a strong follow-on investment from existing Fund I investors, we were fortunate to be significantly oversubscribed for Fund III from our initial fund size of $50 million. The pipeline is strong with six sites under contract and the first closing occurring at the end of December,” said Jon Erickson, HPI’s strategic investments partner.
This investment fund is focused on developing new Class A facilities and selectively acquiring existing self-storage assets with some level of value-add through expansion, lease-up, or management optimization. The fund is initially focused on Texas, Florida and Nevada.
HPI’s initial self storage investment fund utilized $30 million of equity across nine developments in San Antonio, Houston, Las Vegas, and Bradenton, FL. HPI’s second investment fund was a $99 million single investor joint venture that has been acquiring existing self storage facilities since November 2020. The closing of their third fund takes HPI’s total equity under management in self storage assets to more than $195 million.