Flatirons Asset Management has acquired 33 self-storage facilities from Red Dot Storage for an undisclosed price. Red Dot will continue to manage the facilities on behalf of Flatirons.
“After this transaction we currently own 76 properties in 14 states,” said Scott Smith, CEO of Flatirons.
Flatirons’ other properties are operated by Red Dot Storage as well. The Louisville, CO-based storage operator runs more than 190 facilities in 19 states.
Flatirons was formed in 2019 to provide tax advantaged real estate investments to investors. Primarily it was formed to invest in the self-storage asset class. The firm syndicated four prior offerings of self storage portfolios to 1031 exchange investors, all of which were with Red Dot and closed on or before 2020.
“We couldn’t be happier with our longstanding relationship with Red Dot,” Smith said.
Inside the portfolio
The portfolio of Red Dot properties align just right with Flatirons’ core investment philosophy.
“That’s why we like this portfolio. It has years of operating history that points to a track record of stabilization with some potential for future growth. As a property manager, Red Dot has always led with an efficient cost structure and strong revenue management,” Scott said.
The acquired facilities total 9,125 storage units and encompass more than 1.3 million rentable square feet. The portfolio was 90% leased as of August 31. The portfolio is located in Alabama, Iowa, Illinois, Indiana, Missouri, Mississippi, Tennessee, and Wisconsin
Unmanned operating model
Red Dot, launched in 2013, was an early adopter of remote management technology for self-storage.
“COVID heightened the need for storage operators to deploy customer facing technology. Red Dot’s unmanned operating model proved to be ahead of its time,” Scott said, “We were impressed with this portfolio’s same-store NOI growth which easily beat the street. We have no doubt that the Red Dot technology contributed to that performance.”
As for the economic clouds on the horizon, Smith said their portfolio is well-positioned to weather the changes.
“There’s much yet to discover about this tightening economic environment, but we don’t anticipate a meaningful impact on our portfolios,” Scott said. “We took a conservative underwriting approach to this recent purchase, understanding that revenue increases are likely to slow from the levels seen over the past few years.”
Ultimately, Scott said they are confident in storage’s ability to endure turbulent economic times compared to other asset classes.