A Chicago, IL-based real estate investment firm plans to break into the self-storage market by purchasing about 1 million square feet of space over the next two years.

South Street Capital also plans to acquire another 1 million square feet of combined office, retail and multifamily properties during that time.

Exposure to self-storage is an important part of our long-term strategy.
— Marc Muinzer, founder and principal of South Street Capital

“I view the self-storage sector as a hedge for if, and when, the economy slows or falters,” said Marc Muinzer (pictured at top), founder and principal of South Street.

“Self-storage is a good fit for the South Street Capital platform in that it should help us diversify and hedge the office and retail side of our business, which remains an active part of our focus,” Muinzer added.

Eyeing $50M to $100M in assets

The push for acquisitions follows South Street’s recent series of commercial real estate dispositions in Chicago, including the sale of an office building at 1165 N. Clark St. for $22.75 million. Since its founding in 2002, the firm has bought, re-positioned and sold more than $100 million in real estate.

Cincinnati OH
Cincinnati, OH, is one of the self-storage markets being targeted by South Street Capital.

In addition to its own capital, South Street invests money from institutional partners and high-net-worth individuals.

Muinzer said the long-term goal of the firm is to acquire between $50 million and $100 million worth of self-storage property. The firm is pursuing several facilities and portfolios in the Midwest and Texas. Metro areas being targeted by South Street include Cincinnati, OH; Indianapolis, IN; Minneapolis, MN; and Austin, Dallas and Houston, TX.

“If a slowdown occurs, South Street Capital needs to have a diversified portfolio. Exposure to self-storage is an important part of our long-term strategy,” Muinzer said.

Equity battle

Muinzer said South Street plans to manage acquired facilities on its own. Each facility will be branded separately.

South Street joins an increasingly crowded field of real estate private equity groups that are investing in portfolio construction or are backing established operators.

Dallas, TX-based Leon Capital Group recently said it had earmarked $200 million to buy and develop self-storage facilities. Another Dallas firm, Rosewood Property Group, purchased an 18-property portfolio and plans to invest up to $75 million with another firm to develop self-storage properties. Other companies that have made or are plotting significant investments in self-storage sector this year include Sperry Van Ness and DealPoint Merrill, TPG Capital, Calidus Holdings and Virgo Investment Group.

“In many cases, private equity firms flush with cash are moving upstream to compete against larger REIT players,” Muinzer said.

Alexander Harris