Middle-market investment bank Brown Gibbons Lang & Co. of Cleveland has launched a division offering real estate advisory services for a variety of industry niches, including self-storage.
Jay Crotty (pictured above), a senior vice president, and Thomas Doyle, an associate, lead the Tampa, FL-based self-storage team of the new division, Brown Gibbons Lang Real Estate Partners. The newly formed real estate brokerage also has teams handling health care and industrial properties. A multifamily team is coming soon.
Crotty and Doyle recently completed their first deal under the BGL banner: the sale of a 41,000-square-foot facility in Savannah, GA, to SecurCare Self Storage. The brokers are actively marketing other facilities throughout the Southeast. Crotty previously worked at Velocity Partners and Marcus & Millichap, and Doyle at Realty Asset Advisors and Keller Williams Realty.
“We hear from lots and lots of clients that there is a need for new and additional advisers in the space, so we are being extremely well-received,” Crotty said.
Crotty said the need for more advisers has arisen because self-storage has become a mainstream asset class for real estate investors. The SpareFoot Storage Beat spoke with Crotty and Doyle about the current market for self-storage real estate.
There is definitely an appetite for big portfolios. Some of the bigger buyers will absolutely pay a premium for a quality portfolio.
— Thomas Doyle, associate at Brown Gibbons Lang Real Estate Partners
What is one of the most pressing needs in the marketplace that you hope to meet?
Crotty: There is a tremendous amount of consolidation happening, and an awful lot of mom-and-pop owners who need quality representation and advice to max out the value of their asset. Many of these owners spend an entire lifetime working to build up a one-, two- or three-property portfolio and a very significant portion of net worth is wrapped up in these assets, and to be able to help monetize those for them is a very rewarding experience.
What is the appetite for big portfolio transactions over the next 12 to 18 months? Do you expect many of them to be available for purchase during that time?
Doyle: There is definitely an appetite for big portfolios. We get that question every day. Some of the bigger buyers will absolutely pay a premium for a quality portfolio.
Crotty: The challenge is the very large portfolios have frankly been gobbled up. There are still a few left, but there are more of the midsize portfolios with seven to 15 facilities. We’ll see those actively traded. There is also a tremendous amount of privately owned one-, two- or three-asset portfolios that are institutional-quality assets in the $10 million range. We expect to see a lot of those deals trade, because there is a lot of money chasing those.
Do you feel that the premium prices that REITs have paid over the past few years are creating any unrealistic expectations for some sellers that are thinking about bringing their facilities to market?
Crotty: It is our job as an intermediary to expose the asset to the widest pool of qualified buyers and let the market speak. Once the market has spoken, with not just one offer but numerous offers, a seller can be confident that they they know the true market value of that asset. Their decision to sell or not to sell is up to them.
Doyle: If an owner who has a preconceived notion of what their property is worth, we go in as consultants and advisers, and a lot of the time we have to let them know not what “you want to hear” but what “you need to hear.” We will evaluate the asset and describe exactly what is realistic on the open market.
Are you seeing more investors who are new to storage looking to buy facilities?
Doyle: Yes, there are lots of new investors. Self-storage is becoming more accepted as a property type, and we have been getting calls from owners of retail or multifamily who are seeing how wonderful self-storage is.
Crotty: As an investment bank with deep strong relationships with private equity firms, we see some of them putting a lot of money into storage quite aggressively now. A couple weeks ago, I was speaking to one private equity group whose latest $500 million fund has $100 million allocated for self-storage.
How much longer do you expect the seller’s market for self-storage to continue? What signs will indicate that it might be coming to an end?
Doyle: As we all know right now, we are in an all-time low-interest-rate, low-cap-rate environment. As long as they are going strong, it is going to be a seller’s market.
Crotty: I agree 100 percent. The number one threat to the frothy seller’s market we are in is increasing interest rates. The latest job reports were exceptionally strong, far exceeding expectations. If we start to see signs of a rapidly improving economy, we could see some tightening on the part of the Federal Reserve.
The only other risk I don’t see happening anytime soon is an oversupply as development picks up, but I think we are many years from that.