Backed by $300 million in equity, a new self-storage investment firm whose entire team came from industry heavyweight W.P. Carey is poised to wrap up its first acquisition.

Merit Hill Capital, with offices in Brooklyn, NY, and Dallas, TX, is set to close June 1 on the purchase of a self-storage facility. The firm has two other self-storage facilities under contract, said Liz Raun Schlesinger, founder and CEO of Merit Hill Capital.

Merit Hill aims to acquire, develop, own and manage self-storage facilities, and then build a portfolio and sell it, Schlesinger said.

In November, Schlesinger left her position at W.P. Carey as managing director in charge of self-storage investments. She co-founded that company’s self-storage vertical in 2006, a year after joining W.P. Carey. In all, Schlesinger handled 76 self-storage deals at W.P. Carey representing investments of more than $1 billion. At last count, W.P. Carey was the eighth largest self-storage operator and operator in the U.S. based on total square footage.

Venturing out

Schlesinger said she felt the time was right to depart W.P. Carey and venture out on her own — a decision that she said was hers.

Today, Schlesinger is doing pretty much the same type of work as she did at W.P. Carey, but at her own firm. She and the five other people now at Merit Hill made up the self-storage team at W.P. Carey. In April, W.P. Carey named Brian Boulter, a former Extra Space Storage executive, as director of its self-storage portfolio.

Schlesinger said Merit Hill is scouring the country for deals, focusing mostly on making one-off acquisitions and snapping up small portfolios. Ideally, acquisition targets will be in markets that have at least 25,000 residents and are exhibiting population growth, she said.

“We’re typically not the group that’s doing the big transaction of the year,” she said.

The firm is eyeing facilities across the U.S. that are ripe for improvement through rate and occupancy gains, management changes and expansion opportunities, Schlesinger said. She calls it the “value add” strategy.

Liz Raun Schlesinger, founder of Merit Hill Capital.
Liz Raun Schlesinger, founder of Merit Hill Capital.

Challenging market

Executing that strategy has proven to be challenging.

Before arranging the three single-asset acquisitions it currently has in the pipeline, Merit Hill looked at 152 deals, Schlesinger said. Merit Hill is competing against a torrent of capital that’s chasing self-storage acquisitions, she said.

“It’s a lot of work to find deals that make that sense in this market. And I’m not sure when that will change. My sense is it’s going to change in the next year or two, but I’m not sure,” Schlesinger said.

One thing is sure, though: Merit Hill has a healthy amount of capital to make acquisitions that do come along. Schlesinger said the firm’s $300 million equity commitment came from a “very large and respected” private investment firm. She declined to disclose the investor’s identity.

As Merit Hill lines up acquisitions, it’s turning to CubeSmart and Extra Space to manage them, Schlesinger said. Other third-party managers are under consideration, she said. 

Looking forward, Schlesinger said she and her Merit Hill teammates — all of whom bonded at W.P. Carey — are eager to hit “another home run” in the self-storage industry.

“We’re a unique group in that we’ve been in the sector for a really long time, and we have one of the best track records out there and a very strong reputation for doing what we’re doing,” she said. “We’re really excited, honestly, to all be together and doing this on our own. We’re hopeful about the opportunities in the industry, but cautious, given the amount of capital that’s flooded the industry and the operating performance relative to supply coming online.”

John Egan