A Los Angeles, CA-based real estate company that converts shopping centers into self-storage facilities has opened up a $25 million fund to investors.
DealPoint Merrill introduced its Growth and Income Fund in January. Money in the fund will pay for the firm’s redevelopment of commercial and retail properties.
“One of our development strategies is to build Class A climate-controlled self-storage, so long as we are in a supply-constrained market,” Sterling McGregor, president and chief investment officer of DealPoint, told The SpareFoot Storage Beat.
DealPoint’s other strategies are to buy existing self-storage facilities and update them, or to redevelop shopping centers with retail anchors.
Investors knocked on the door
McGregor said DealPoint decided to launch the fund after several accredited investors indicated they wanted to pump capital into the company. Historically, DealPoint has required a “very substantial” minimum investment beyond the reach of most individual investors.
“The new fund will allow accredited investors to co-invest with us in smaller amounts but still reap robust returns that our larger investors hope to achieve,” McGregor said.
McGregor said the fund is launching with a $25 million target and will be capped at $50 million. Investors can expect their interests in the fund to last three to five years, he said.
New York City, NY-based Bendigo Securities is administering the fund. DealPoint already has a co-investment partnership with Sperry Van Ness.
DealPoint became active in the self-storage industry about 18 months ago. During that time, it has absorbed 975,000 square feet of self-storage, including the purchase of existing facilities.
During the first quarter of this year, DealPoint is on track to assume ownership of another 325,000 square feet through self-storage construction and acquisitions. The firm has another 785,000 square feet in its pipeline through a combination of purchases and conversions.
Among the firm’s pending projects are the conversions of a former Walmart in Joliet, IL, a former Kmart in St. Charles, MO, and a former Kmart in Saginaw, MI.
McGregor said the firm continues to seek opportunities in markets with significant barriers to entry; job and population growth; and upcoming public and private infrastructure projects.
Self-storage REIT CubeSmart manages most of the company’s facilities.
Preserving the past
Representative of the type of self-storage projects that DealPoint undertakes is the conversion of a former furniture store in Galveston, TX, that was built in 1840. The property was one of the few structures to withstand a deadly hurricane in 1900.
McGregor said the firm spared no expense to make sure the building could hold up during the next major hurricane in Galveston.
“As part of the renovation, we braced the structure with steel supports with engineering designed to withstand a Category 5 hurricane,” McGregor said.
The firm says it spent more than $1 million converting the property for self-storage.
“The prior owner made substantial structural improvements as part of a redevelopment plan to convert the building into loft apartments,” McGregor said.
DealPoint purchased the property, at 2125 Church St., for $2.47 million in 2012 as part of an REO sale, according to property records. The facility operates under the name Storage Inc.