Crow Holdings Capital – Real Estate (CHC-RE) has had a busy 16 months, completing two dozen transactions since it began investing in the development, redevelopment and acquisitions of existing self-storage properties.
Dallas-based CHC-RE now has storage properties in nine states, including Texas where it has projects in Austin and Houston. The company seeks to buy newer vintage properties or create joint ventures to put up Class A storage sites.
“We are very pleased with the rate at which we have been able to deploy capital within the self-storage space,” said Ben Doherty, who leads the company’s self-storage investments (pictured at top).
CHC-RE is among several diversified real estate companies to enter and make significant headway into the self-storage industry during the last couple of years. The multi-billion-dollar firm has long invested in industrial, retail, office and residential property types, but is new to storage.
“By focusing on the event-driven nature of self-storage, we look forward to working with industry and joint venture partners towards the larger goal of creating value through rental rate growth and capital appreciation,” Doherty said.
The company offered further insight into its self-storage strategy heading into 2017:
Storage Beat: What is the company’s long-term strategy: Hold or sell? And in either case, why is it the chosen strategy?
CHC-RE: The self-storage strategy is to construct a geographically diverse portfolio by acquisition or new development of core like properties. Consistent with the overall strategy, CHC-RE may exit an investment either individually or as a part of a portfolio if a premium can be realized.
Historically, returns for self-storage have outperformed other major asset classes, supporting the perceived long-term potential of the sector. More generally, the self-storage strategy is designed to generate current income and benefit from the capital appreciation of portfolio investments.
Storage Beat: How does CHC-RE manage its facilities?
CHC-RE: Typically, nationally recognized third-party management companies are hired to perform the on-site property management, which includes a mix of public REIT operators and large private operators.
Storage Beat: Why did the company decide to get into storage? Why at that time?
CHC-RE: The life event demand drivers of self-storage provide a stable user base for the sector. Additionally, the lack of new development in recent years and attractive fundamentals further support CHC-RE’s interest in the space. With an anticipated increase in new supply in many of the major markets, growing demand will likely lean towards the modern and well-located facilities that CHC-RE is targeting.
Storage Beat: What challenges do they face as they get into storage?
CHC-RE: In many markets, at this point in the cycle, it can be challenging to find operating properties at an attractive purchase price. Therefore, CHC-RE is generally focusing on implementing value-add rehab/conversion programs and ground-up development where it makes sense.
Storage Beat: What trends/challenges do you see coming forward?
CHC-RE: Recent regulations have made obtaining construction debt more difficult, and CHC-RE believes this trend is likely to assist in keeping new supply in check. In addition, operating fundamentals are likely to moderate as the first wave of recent new supply hits the market. Still the fundamentals in self-storage are anticipated to continue to outperform the other major commercial real estate asset types. Another trend CHC-RE has observed is real estate developers entering the space who have not traditionally been self-storage developers.
Storage Beat: Tell us about specific properties and projects you completed in the last year.
CHC-RE: Within the last 12 months, CHC-RE has made approximately 24 investments in the self-storage sector. Assets are currently located in Texas, Arizona, Colorado, Nevada, California, Oregon, Washington, Massachusetts and North Carolina, and represent approximately 1.9 million rentable square feet and 17,300 units.