The self-storage sector is hot—and Rajen Sheth has created another investment fund devoted to it.
Sheth is CEO of Boardwalk Development Group (BDG), LLC, in Johns Creek, GA, a private equity real estate investment company. Boardwalk recently announced the launch of its $50 million Boardwalk Storage Fund I, LLC. The fund will focus on buying and growing self-storage assets in the Southeast, specifically in Virginia, North Carolina, South Carolina, Florida, Alabama and Tennessee.
Sheth and Chirag Shah, senior analyst, are BDG’s only employees.
What makes self-storage such a good investment?
“If you look at self-storage and the history of the industry in the last 15-20 years, it has been the highest returning sector of commercial real estate, at least for the last 15 years,” said Sheth, 49. “It’s averaged 20 percent over the last 10 years.
“There are other asset classes in commercial real estate that have done well, but over the long haul, self-storage is the best return vehicle of every asset class,” Sheth added.
This is Sheth’s second go-round with a self-storage investment fund. He started the ValueSpace Storage Fund I, also a self-storage investment fund, in early 2008. It purchased facilities in Canton (pictured above) and Cumming, both in Georgia. But then the national economic slowdown hit hard.
Facing the downturn
“Our objective was to raise capital, acquire multiple properties, put together a portfolio of properties and then work to achieve better rents, improvement on the properties and increase net operating income,” Sheth said. “We did that; we had to wait a little longer because the downturn was as long and as deep as it was.”
After seven years—two more than the desired five-year window to sell a portfolio—he sold it to SecurCare, an affiliate of publicly-traded National Storage Affiliates. Investors received returns of 110 percent, Sheth said.
“Despite going through a deep downturn, for us to be able to generate the strong returns that we did made it clear that self-storage was a strong area for investment,” Sheth said.
The new fund seeks to raise $10 million and leverage that to $50 million. Potential investors include high-net-worth individuals, accredited investors, family offices with between $50 million and $100 million, and institutional investors.
Boardwalk has some impressive members on its board of advisors, such as Robert Francis, former board chair of the National Self Storage Association; Dan Curtis, a 2005 inductee into the Self-Storage Hall of Fame; and Mit Shah, senior managing principal and CEO of the Noble Investment Group in Atlanta.
Shopping for storage
Sheth and Shah look at hundreds of properties – spending about half their time on the road — to find those special few worthy of purchase. The fund will focus on properties costing between $2 million and $8 million.
Boardwalk also seeks to improve the customer’s experience by upgrading rental offices, gate and camera systems, and website and online rental ability, and to offer a 24-hour on-site rental center. Sheth said most owners do a great job running facilities, but not all necessarily invest in aesthetics.
“Industry research shows that customers look for and make a decision on where to store based in part on the quality of the facility, the look and feel of it, the office and its environment, and the manager behind the desk, in addition to location,” Sheth said. “That’s a value-add that we’re looking to do in our fund.”