By the end of 2017 — less than one year after its first acquisition — City Line Capital LLC’s self-storage portfolio should be well over 1 million rentable square feet. And the Bala Cynwyd, PA-based self-storage investment firm shows no signs of slowing its brisk pace for acquisitions.
In fact, if things keep proceeding the way they are now, City Line Capital could own more than 60 facilities in just three years’ time. At that level, the firm likely would be among the country’s 20 largest self-storage owners, based on 2017 figures.
Rick Schontz, the firm’s managing partner (pictured at top), said that on a rolling 12-month basis, City Line Capital plans to spend $50 million per quarter on deals, mostly acquisitions of existing facilities. That adds up to $200 million, or 20 to 25 facilities, over a 12-month span.
Getting more competitive
Given the ready access to a stream of capital from City Line Capital’s equity partner, Schontz said his firm can be “fairly competitive” in chasing deals.
Matt Weckesser, director of acquisitions, said City Line Capital has quickly grown from a well-conceived idea to “a machine that is becoming more and more well-oiled. We want the market to know that we’re out there aggressively looking for more opportunities.”
City Line Capital’s equity partner has given the firm a 10-year window for making acquisitions, Schontz said. As such, he and his colleagues don’t feel pressured to bundle properties and sell them as a portfolio in, say, three years. Potential exit strategies include going public or being acquired by another operator, Schontz said.
“We’re just not going to be rushed to do anything, based on the way the equity’s coming in,” he said. But, Schontz added, ‘’it’s not like we’re holding these properties for 40 years.”
Buying the dip
In its quest for deals, Weckesser said City Line Capital is taking advantage of a recent decline in self-storage asset values following a run-up that stretched from 2014 to 2016.
“That’s translated for some sellers in some markets into expectations that are in line with buyers,” Weckesser said of the tapering off of asset values.
“But there’s also some lingering sellers out there who may be coming off the sidelines a year or two later than they should have in terms of a sale,” he added. “So the challenge for us right now is making sure that we can focus on the right opportunities.”
For City Line Capital, the right investment opportunities primarily are existing facilities but also could include undeveloped land, certificate-of-occupancy projects or joint ventures, Weckesser said.
In terms of existing facilities, the firm is focusing on properties in primary and secondary markets that contain more than 40,000 rentable square feet and have an asset value of at least $3 million to $4 million, company officials said.
As a small but well-capitalized company, City Line Capital can vet deals quickly and offer competitive valuations, Weckesser said.
“What we’re trying to do is serve as a good sounding board for sellers who may want to come off the sideline and consider a sale,” he said.
Schontz and Weckesser launched City Line Capital earlier this year along with Matt Hardiman. All three were self-storage brokers at HFF’s office in the Philadelphia, PA, area.
Since March 2017, City Line Capital has purchased 12 facilities in eight states totaling 775,000 rentable square feet, company officials said. As of early November, another six facilities totaling 425,000 rentable square feet were under contract. Most of these are one-off deals.
“We have the capital to buy portfolios, and we’re looking for some portfolios now,” Schontz said in October, “but so far we’ve done it the hard way, on a one-off basis.”
Growing a national platform
If City Line Capital closes on all of its under-contract deals, it’ll own 18 facilities with 1.2 million rentable square feet as the calendar flips to 2018. At year’s end, the portfolio should carry an asset value of roughly $150 million, Schontz said.
“We have a very strong pipeline,” Weckesser said, “and a lot of equity we need to fulfill a need for.”
Today, City Line Capital owns facilities in Colorado, Florida, Louisiana, Michigan, North Carolina, Pennsylvania, South Carolina and Texas. Third-party managers, both public and private operators, run all of the properties; rebranding the facilities under a single name is being considered.
Schontz said the firm is scouring the U.S. for deals, but it’s concentrating more on demographics and rent per square foot than it is on geography.
“Our goal is to grow a national platform,” Schontz said