Golden, CO-based Spartan Investment Group has been on a roll lately, and with its latest hire the firm is positioned to keep the streak going.
Last week the company sold a two property portfolio consisting of two FreeUp Storage facilities in Denver and Aspen Park, Colorado. The portfolio transaction generated an internal rate of return of 18.2% for the fund’s first tranche of advisors.
“Whether it’s a steep mountain range to develop or a tight market for dealmaking, when we set our sights on a plan for growth, we deliver,” said Ryan Gibson, CIO and co-founder of Spartan. Gibson declined to share the sale price.
The origins of the portfolio date back to 2018, when Spartan purchased FreeUp Storage Aspen Park in Conifer, Colo. from a local military veteran. Afterwards, the firm acquired FreeUp Storage Devonshire Boulevard in Denver. In early 2021, the firm began an ambitious nine-month construction project to add 65 units to the Aspen Park location at 8,500 feet of elevation.
Spartan operates facilities across the country, with its various funds acquiring nearly 60 facilities since 2014. The company has raised more than $250 million from a network of over 5,000 investors to build its portfolio.
Earlier this month, Spartan launched a new investment vehicle—a Delaware Statutory Trust. The DST provides a single asset investment into a 120,000-square-foot property that includes 969 rentable units in a growing market.
“At Spartan, we operate with a longer-term strategy in mind. The launch of the DST provides a way for 1031 exchange investors to participate in institutional quality self-storage investments in a tax-deferred manner,” said Gibson. “This allows us to expand our investment offerings, and over time, contribute to the growth of our quality portfolio, brand and team.”
Spartan’s new strategic advisor: Chris Sonne
In addition, Spartan hired veteran industry appraiser Chris Sonne to serve as a strategic advisor to the company.
In his new role with Spartan Investment Group, Sonne will support and assist Spartan’s risk mitigation process and strategic planning. Additionally, he will be responsible for promoting and expanding Spartan Investment Group’s network of investors and professional contacts.
Chris Sonne began his career in valuation in 1984. He has worked with clients on a variety of property types through Deloitte, Bank of America, and his own firm — The Sonne Group. Later in his career, he founded and served as the managing director of Cushman & Wakefield’s valuation & advisory’s self-storage valuation group. Most recently, he served as the executive vice president and national practice co-leader for the valuation & advisory’s self-storage specialty practice at Newmark.
The Storage Beat caught up with Sonne to find out about the new role and take his pulse on current storage trends.
How did you first meet the folks at Spartan?
Chris Sonne: I was speaking at the SSA Ski Workshop in 2022 in Big Sky, Montana, the American Alps as they call it, and Scott Lewis (CEO and Co-founder of Spartan) was there. I didn’t know Scott personally, but he asked some really good questions that stood out for the depth and complexity. We talked afterward and happened to see them at the airport and had lunch.
What convinced you to take an official role with the company?
I was very impressed with Scott. He’s active in the US Army Reserves and has a strong academic and career background. With the emphasis on mission and values I was very impressed with this young start up self-storage company. We later met up at the Newmark investment symposium we do every year in Houston. We were taking a bus back from dinner and he asked if I would consider coming on as a Strategic Advisor, and I said that it sounded interesting.
And you are still an appraiser at Newmark?
Yes, it doesn’t change my role as an appraiser, it just gives me extra homework at night.
What does a strategic advisor do?
We talk shop. I did a presentation regarding industry trends and what is happening in storage. I am also the go to person for reviewing deals, doing analytics on deals and their portfolio. Also I’m looking at benchmarks such as what is their cost of occupancy, for example, how does that compare to nationwide. When I go to meetings, I ask questions and they ask me for counsel.
Speaking of trends, how would you characterize the current storage market? How would you characterize the current leasing season?
I call it reversion to the mean, or a return to normal. We had boom years during COVID. We had the storage stocks going up over 60% in a year, demand at record levels, record occupancy and rate increases on existing customers. It was not expected that it would last forever. It was an outside factor—a once in a 100 years event that played out very well for the industry. Over the long run it wasn’t like to continue and it didn’t.
What are the challenges facing the industry now?
Well it is difficult to build, difficult to get entitlements. There are labor and supply issues. Money to fund it is very expensive. All these barriers to a lot of construction are keeping things relatively in balance [for existing operators.]
What about transactions?
It’s an interesting time. On the portfolio side and the institutional side, we have the largest transaction volume in history. With the Extra Space and and Public Storage acquisitions the industry is over $18 billion year to date.
On the single asset side, we have seen a 60% drop in single asset transactions, and out of those transactions that do occur, over 60% are under $5 million.
