A North Carolina-based company is raising up to $10 million to acquire self-storage facilities and convert them into fully automated, unmanned operations.
Raleigh-based 10 Federal Storage said their acquisition fund will focus on acquiring ‘mom & pop’ operated facilities located throughout the Southeast, with a concentration in North Carolina.
The company started raising money in late May, seeking investors for its fund named “10 Federal Self-Storage Acquisition Company 1.”
So far, the new fund has acquired one facility for conversion – the South Point self-storage facility in Belmont, NC, using money contributed to the fund by 10 Federal co-founders and brothers Cliff and Brad Minsley.
“We’ll open it up to our legacy investors but we’re also interested in expanding our investor base,” Cliff Minsley, 10 Federal’s managing director, told Sparefoot Storage Beat. “We’re cognizant of not raising too much too quickly.”
The Belmont facility was an ideal buyout target, 10 Federal’s director of acquisitions Kris Bennett.
“It was a ‘Mom & Pop’ operated facility with no website, no online advertising, a large property manager salary and rents that trailed the market,” Bennett said in a press release announcing the company’s acquisition.
Automation is the future
10 Federal plans to implement its full suite of technologies including electronic locks, a kiosk, controlled access and a roving camera to all of its facilities.
Over the past three years, 10 Federal has developed the right combination of hardware and software to successfully enable a customer to rent a unit and gain access without the help of a property manager.
In doing so, the company says the system has both lowered operating and increased revenue as the facility can rent units at any time.
Prior to launching the current fund, the company finished its first ground up construction project: a 155-unit unmanned facility in Graham, NC. Opening in the middle of 2016, it took just six months to lease it up — a rate twice as fast as what the company expected.
“Overall, we’ve realized a 10 to 25 percent savings on NOI based on the elimination of salaries alone,” said Brad Minsley. “The surprising benefit we’ve seen is a material uptick in revenue. With our facilities you can rent a unit 24 hours a day, seven days a week.”
The company currently operates a total of five facilities in North Carolina.
Under the hood
To build these unmanned facilities, 10 Federal has contracted with Advanced Kiosks, which installs self-service kiosks for the healthcare, human resources and retail industries and also for churches, schools and governmental agencies.
Matt Tarpy, an account manager with Advanced Kiosks, said his company only entered the self-storage marketplace in earnest at the beginning of the year.
“Our first experience with it was late last year,” he said. “We noticed a lot of self-storage people contacting us. Having a new option is kind of exciting for a lot of people, I think.”
Tarpy is quick to point out that Advanced Kiosks is not the entire solution. It just provides the kiosks and user interface. For other aspects of automation, 10 Federal turned to self-storage players including Janus International and PTI Security Systems.
Tapping a new industry
There was a patent involved that expired in January 2017 so Advanced Kiosks wasn’t free to enter the industry for risk of violating a patent – unless it went the licensing route.
“We weren’t interested in doing that,” he said. “So we waited for it to expire. We went from zero self-storage business in 2015 to next to zero business in 2016 to five or six calls a week now from operators interested in what we have to offer.”
Advanced Kiosks sees the self-storage market as a growing revenue stream for the company. It already has several customers, some of which have multiple locations.
“It’s been a really interesting vertical for us,” Tarpy said. “For the most part we didn’t change or develop anything. We’re using the services and products we have offered for years. This is just a new application for it.”