Setting an initial target of quickly amassing a portfolio valued at $1 billion, a Denver, CO-based self-storage startup is scouring the U.S. for facilities to buy, primarily in tertiary markets.
Steve Treadwell, CEO of SpareBox Storage, said a portfolio with properties worth $1 billion is the company’s first valuation “goalpost.” Treadwell said that in order to reach this goalpost, the startup will need to acquire about 100 to 200 facilities. The company aims to purchase facilities measuring roughly 40,000 to 80,000 square feet.
“It’ll take a little time to get enough good deals to add up to $1 billion, but we are long-term investors,” Treadwell told the SpareFoot Storage Beat. “We don’t have a buy-and-flip or fix-and-flip mentality. We’re in this for the long haul to create value and create a valuable platform.”
Amarillo and beyond
SpareBox’s first acquisition is a 10-facility portfolio in Amarillo, Texas. The properties feature 670,000 net rentable square feet across more than 4,000 units. The portfolio represents more than one-fourth of the total square footage in the Amarillo self-storage market.
Backed by New York City, NY-based investment firm Rizk Ventures LLC, SpareBox is fueling its acquisition strategy with up to $500 million in borrowing power from JPMorgan Chase and about $200 million in equity raised from an institutional investor.
“We’re going to be aggressive and grow wherever we find the right opportunities,” Treadwell said. “Given our capital stack, that won’t be our limiting factor. Our limiting factor will be how fast we can find good opportunities.”
Rizk Ventures tapped Treadwell, former executive vice president and chief operating officer of Greenwood Village, CO-based self-storage REIT National Storage Affiliates Trust, to lead its entry into the self-storage market. Treadwell left the REIT in March and joined SpareBox in July.
Tom Rizk, former CEO of Jersey City, NJ-based office and multifamily REIT Mack-Cali Realty Corp., is founder and chairman of Rizk Ventures, which announced the SpareBox platform Aug. 27. Rizk Ventures, which controls a multibillion-dollar real estate portfolio, in February dropped a proposed takeover of Mack-Cali.
Entering “under-loved” markets
Treadwell said the Amarillo acquisition aligns with SpareBox’s strategy of accumulating geographic clusters of undervalued self-storage facilities in tertiary markets as well as in suburbs of larger markets. For SpareBox, the sweet spot is facilities in U.S. metro areas whose population ranks from roughly No. 50 to No. 250. Amarillo shows up in the bottom half of that range.
“We’re going after tertiary market opportunities, looking to continue consolidation of the industry,” Treadwell said. “We’re happy to play in secondary markets as well, but we think that the value creation really lives in those outlying markets that a lot of the bigger players don’t have either the time or the patience to go after, and that in many ways have been overlooked and under-loved.”
SpareBox’s potential pool of acquisitions contains tens of thousands of independently owned, institutional-quality facilities, Treadwell said. SpareBox will consider both one-off and portfolio deals, with an eye toward properties in the Southwest and Southeast. Treadwell said he wants to avoid opportunities on the West Coast and in the Northeast, largely because both regions are witnessing a population exodus.
SpareBox will own and operate all of its facilities, which will carry the company’s branding, Treadwell said.
“We will have a national platform and a national portfolio,” he said.