As self-storage construction heats up across the country, Irvine, CA-based Westport Properties is scaling up its development efforts in several key markets.
“We are seeing double digit returns and occupancy at all-time highs. There is room for more product, and definitely a need for it,” said Drew Hoeven, president of real estate (pictured at top).
The company has two development sites in New Jersey, two sites in Phoenix, AZ and three sites in Miami, FL. The company has four projects under construction in Southern California, in addition to a conversion project in Los Angeles set to open by the end of the year.
The company recently bulked up its development team, hiring Joe Capasso as president of development and hiring David Kelly and James Preacher as development managers. The company also hired JP Smith as an acquisition analyst.
Hoeven was recently promoted from his previous role as vice president of acquisitions to his current position. Hoeven joined the company—founded by his father Barry Hoeven—in 2005.
Hoeven said the company is comfortable with the size of its current pipeline, but is ready to take a run at additional opportunities if they fit within the company’s strategy.
“We have the right team in place to bring on a significant amount of development,” Hoeven said.
The company developed its last facility in Alhambra, CA, which opened last year. The company developed its first facility in Cerritos, CA in 1988.
Hoeven said he is bullish on new self-storage development, as long as it is smart development.
“It goes back to building in the right markets with the right rents, and not kidding ourselves on costs to get there,” Hoeven said.
He said most operators who have the track record and the necessary capital to build new facilities are actively developing right now.
“I see a lot of deals coming out of the ground in 2017. They are all going through the entitlement process now and starting construction in 2016,” Hoeven said.
Seizing the moment
Scott Nguyen, the company’s recently promoted chief financial officer, said the strong performance of the self-storage sector has increased the availability of both equity and debt financing needed to fuel growth.
“Lenders are more amenable to lending on self-storage construction,” Nguyen said.
Further fueling the company’s renewed push into development are the company’s own results. The performance of the company’s existing 85 property portfolio has outperformed the REITs so far in 2015, according to Mike Brady, chief operating officer.
Brady said the company philosophy of running at lower occupancies in favor of higher rates has given it an advantage over the REITs.
“It has allowed us to capitalize on the hot self storage market, and we still had room to absorb more occupancy that the REITs didn’t,” Brady said.
Brady said the company’s same-store managed locations saw net operating income grow 15 percent in the first quarter and 14 percent during the second quarter.
While the company is ramping up development, it is looking to grow through acquisition as well. The company recently purchased a facility it previously managed for a third-party at 6380 Annie Oakley Drive in Las Vegas, NV for $4.38 million, according to local property records. Prior to that, the company purchased five properties so far this year for a combined $32 million.
Hoeven said they are currently looking at a few acquisition deals on the East Coast.
“We are always searching for good deals,” Hoeven said, “If those opportunities come up, whether it is development or an acquisition, depending on the size, we take a hard run at it.”
(Video credit: Westport Properties)