In just five years, self-storage owner and manager City Line Capital has racked up a monumental achievement—surpassing $1 billion in acquisitions.
To be precise, City Line Capital has spent $1.2 billion on acquisitions since 2017. The company’s portfolio now compromises 212 facilities in 24 states, many under the Storage Sense brand.
Rick Schontz, co-founder, president and CEO of Bala Cynwyd, PA-based City Line Capital, emphasized access to “a reliable and consistent source of equity” — unidentified high-net-worth individuals — as one of the keys to amassing more than $1 billion in acquisitions. But he credits the company’s acquisition team as being the linchpin to this success.
We asked Schontz about passing the $1 billion mark for acquisitions, as well as his company’s growth plans, its pandemic-era growth challenges, his thoughts on self-storage supply and his outlook for the industry.
City Line Capital has surpassed $1 billion in self-storage acquisitions. To what do you attribute reaching that milestone?
Rick Schontz: Our acquisition team is really where it all starts. We have a team sourcing deals directly from owners as well as a team sifting through marketed deals. We are able to analyze a significant number of properties, which enables us to home in on the ones that are a fit for our investment goals.
In this competitive storage environment, though, our creativity and determination in completing transactions is what sets us apart. Whether it is creatively structuring transactions or resolving issues that arise during the due diligence period, we will work tirelessly to ensure that acquisitions that make sense get done.
What are your growth plans for 2022? Which particular metro areas are you looking at?
We are working to continue the same increasing growth trajectory we have had since our inception. As for particular metro areas or markets, obviously markets in which we have an existing presence are areas we are targeting.
However, as we’ve shown by building a presence in numerous markets in 24 states, we are always seeking opportunities to establish a foothold in new markets. In particular, we are attracted to secondary markets with strong demographic and supply metrics.
What long-term changes has the pandemic prompted in the self-storage sector? How is City Line Capital adapting to those changes?
There was a great deal of uncertainty at the outset of the pandemic, but as everyone soon came to realize, the self-storage sector was primed to excel as a result of the pandemic.
As far as how we are adapting to the changes in the sector, it’s really just about focusing on what’s next. For example, how will inflation affect the sector? The month-to-month nature of self-storage allows for real-time adjustments to rents, which is certainly attractive in an inflationary environment. However, there are some real questions as to whether self-storage rents can continue to grow after the significant rate increases that the industry has seen over the past couple of years.
What is your outlook for the overall self-storage market this year and into 2023?
The self-storage sector is certainly in a good spot right now, riding the wave of increased rates and occupancy through the pandemic. Even if that trend slows, which it likely will, the industry today is far ahead of where anyone would have predicted in 2019.
New supply generally has not been a big concern for the self-storage sector in the past couple of years. How has new supply affected your markets?
We haven’t seen new supply create any significant pressure over the past couple of years. That is certainly a concern that we watch for, but with interest rates and construction costs both increasing at a rapid pace, we see most people expecting new development to proceed at a relatively modest pace compared to what you would typically expect on the heels of the extraordinary operational environment that the sector has been in over the past year or two.