Recreational Storage Group is riding the Boat-RV storage wave that began a few years ago during the height of the COVID-19 pandemic.
RSG, a New Jersey-based company led by industry veterans Erik Johnson and George Hristodoulou, recently announced that it has broken ground on a new 135,000-square-foot self-storage facility, with exterior Boat-RV storage, in Ocala, Florida (below). The move followed RSG’s acquisition of land in July in Savannah, Georgia, where it’s currently building a new 166,000-square foot Boat-RV storage facility.
The two storage projects bring to seven facilities that RSG currently owns or has under construction.
Eyeing new developments
Great American Self Storage is an equity investor in five of those projects, including the new facilities under construction in Florida and Georgia, which GASS will manage once they’re completed in a year, said Johnson.
And RSG is eying other developments along the East Coast, as well as in the Gulf of Mexico area. Louisiana and Alabama are among the Gulf states RSG is exploring for potential expansion, said Johnson.
“We’re actively looking at both primary and tertiary markets,” he said. “We’re following popular locales in fast growing areas. … If you know a market that has low square feet (of storage) per capita as the population grows, those are two major drivers in which we’re going to target a market.”
Hristodoulou, who worked with a real estate investment trust before teaming up with Johnson to form RSG in 2022, said RSG is a “data driven company” that generally looks to develop facilities in areas with five square feet of storage per capita.
But he said his firm will also look at areas with higher per capita rates of storage if they’re in fast growing markets, such as in Florida, that will quickly need more storage as their populations rise.
‘A huge unmet need’
Sales of boats and RVs soared during the recent pandemic, as residents sought outdoor-oriented activities to enjoy during pandemic-era lockdowns and social-distancing mandates.
RSG is clearly trying to tap into the accompanying growing storage market for those boats and RVs.
“It’s a totally underserved market,” said Johnson. “There’s a huge unmet need.”
In particular, Class A facilities with covered exterior and interior climate-controlled storage are what the market is demanding – and what RSG is providing, Johnson said.
RSG does offer traditional self-storage. Its new Ocala, Florida facility, for instance, will include 768 self-storage units. But Boat-RV storage will effectively be its calling card.
Besides storage properties in Florida and Georgia, RSG also has facilities in Maryland, New Jersey and Rhode Island.
Committed to ground up development
RSG is definitely committed to ground-up development of new storage facilities, instead of acquiring existing self-storage properties, Johnson and Hristodoulou made clear.
“The greater the risk, the greater the reward,” Johnson said. “We have the skill set to build. Why not take on the construction and entitlement risk for greater reward, right? We get to control them. We get to control the process and build what we feel a market needs.”
He added: “We understand our tenants’ demands. We understand what they want, whether it’s unit size, climatized (storage), security, etc.”
Asked how big he sees RSG getting in five years, Johnson responded: “As big as the market will bear. We want to grow prudently. There’s a lot of developers out there that are much bigger than us that are taking on deals at returns that, quite frankly, we shy away from. Our thresholds on a return basis are higher.”
Finding the right deals
Hristodoulou agreed that future growth has to be smart growth.
“We can absolutely grow this to 30 properties in five years,” he said. “But if we don’t find the right deals, we won’t (do them).”
There are challenges ahead, both Johnson and Hristodoulou agreed in a joint interview.
Among the challenges: high construction costs.
“Over the last few years, we’ve suffered from pretty high inflation and pretty high construction pricing,” said Johnson. “But we’ve seen recent softening in the market. We’re seeing prices come back down, albeit at a slower pace than they went up.
Meanwhile, banks are also more cautious about construction loans.
“The banks are taking longer just to underwrite and provide loans for (projects),” he said. “It’s just a little slower process but good deals get funded.”
