A newly created self-storage investment fund recently made its first two acquisitions and is hunting for more facilities to buy.
VanWest Storage Fund I LLC, affiliated with Denver, CO-based real estate investment firm VanWest Partners, aims to purchase 10 to 12 facilities totaling roughly 400,000 net rentable square feet, said Jacob Vanderslice, founder and principal of VanWest Partners.
Equity fundraising continues
Vanderslice said VanWest plans to close out the fund by next April. In all, the fund will comprise $20 million in debt and $10 million in equity, for a total capitalization of $30 million, he said. As of June 28, 2019, the fund had collected almost $1.65 million in equity from 10 investors, according to a filing with the U.S. Securities and Exchange Commission.
“We are still fundraising for the equity component,” Vanderslice told the SpareFoot Storage Beat, “and are attempting to match the capital-raising cadence with new acquisitions.”
Once the first investment fund is tapped out, VanWest plans to roll out a second fund geared toward self-storage, he said.
Adopting a value-add strategy
The current VanWest fund is pursuing facilities in the Southeast and Midwest with a minimum of 25,000 net rentable square feet and occupancy rates of at least 50 percent, Vanderslice said. In particular, the fund is looking for value-add facilities that can be enhanced through rebranding, capital improvements, and stepped-up revenue and expense management.
The fund’s first two acquisitions are American Mini Self Storage, at 801 S. Old Corry Field Road in Pensacola, FL, and Florosa Self Storage, at 2371 W. Highway 98 in Mary Esther, FL. Together, the two facilities contain more than 85,000 square feet of storage.
“Like most asset classes today, the acquisition environment in self-storage is tight, specifically in primary markets with a flood of institutional and private equity capital entering the industry over the last five years,” Vanderslice said. “With a surge in new-supply deliveries peaking soon in markets like Portland, Nashville, Orlando and Seattle, we believe certain markets will loosen up and create acquisition opportunities in the next few years.”
Vanderslice said the fund’s investment strategy focuses on buying facilities at well under replacement cost.
“Because of this,” he said, “we can keep our rates low and still realize the same return on total cost as a newer-construction competitor in the same submarket.”
Relying on in-house management
Facilities being acquired by the fund (as well as five facilities already owned by VanWest) will operate under the ClearHome Self Storage brand, a management platform that’s wholly owned by VanWest Partners, according to Vanderslice.
VanWest formed ClearHome in 2018 to enable institutional-quality management of its self-storage portfolio, Vanderslice said.
“We firmly believe that nobody cares more about our properties than we do,” he said. “Every decision that ClearHome makes is about minimizing downside without reducing upside while always operating with the mindset of an owner.”