Hearthfire Holdings has big plans for the self-storage property it recently purchased at 2817 N. Peoria Ave. in Tulsa, OK.
The company, which owns 17 properties (plus two more under contract) in seven states, plans to nearly quadruple the Tulsa site’s size from the current 22,900 square feet to 86,000-plus square feet and more than 800 units. The facility is currently managed by Extra Space Storage.
Ethan Blum with Hearthfire Holdings
“Tulsa is a very exciting project for us for several reasons,” said Ethan Blum, director of capital markets for Hearthfire, which is based in West Chester, Pennsylvania. “It represents the first GP/LP joint venture in our firm’s history. The property sits on over 11 acres, which will allow for our value-add expansion of the asset, and we are pumped to be bringing a best-in-class product to this market.”
Hearthfire has 14 employees and its properties are in Pennsylvania, Delaware, Virginia, Indiana, Illinois, Massachusetts and Oklahoma. “We’re probably most focused on the Midwest right now,” Blum said.
We sat down with Blum to discuss the company.
Who are (company leaders) Sergio and Corinn Altomare?
Sergio is from Philadelphia and Corinn is from California. They met while working for the Federal Reserve in Philadelphia. They were there for a combined 20+ years. Over a decade ago they started buying and managing smaller local multi-family deals, learning the business hands-on. They ultimately acquired and became interested in self-storage, which became the focal point of their business, ultimately turning to this asset class full time.
When did the company launch?
2012, but the modern version of the firm with our new team started coming together towards the end of 2022.
What drew you into the field?
My capital markets experience spans across all asset classes but it became clear to me around 2018 that self-storage had an imbalance in terms of capital appetite, but fragmentation from ownership. The size of deals and mom ‘n’ pop nature of many sellers created a major opportunity. There are also so many economic tailwinds for storage and psychological reasons why Americans’ demand for it continues to increase.
You have many self-storage facilities under management. What attracts the company to a potential buy?
We look nationwide for new opportunities but we have a clearly defined buy box. There are a number of metrics and drivers that we evaluate for prospective transactions, and those are ultimately what guide our interest level and eventual bidding on a property.
What does the Hearthfire website mean when it says “ … with a deep pipeline of ongoing acquisitions”?
That means that we are underwriting hundreds of storage opportunities per month, yet only some percentage of those result in formal bids. Another subset of those results is in a contract. We currently have projects under contract, others under construction, others that we own that we’re set to break ground on in Q1/Q2, and a forward pipeline of deals that we are excited about and working towards tying up.
You’ve set a goal to become a top 50 owner-operator; how does a company accomplish that?
By assembling a strong team, by having the correct systems/softwares/technologies in place that have capacity for growth. We are growing organically, one asset or portfolio at a time, but we have the bandwidth for a lot more. It’s a pretty top-heavy industry, which provides an opportunity for a firm like ours to make a splash in the middle market. We are on the right track towards growing our portfolio by a significant margin.
What’s the story behind the name of “Hearthfire Capital”?
It represents warmth, safety, home and family. It speaks to our philosophy as people and who we are at our core.
How do you decide when is it a good idea to make such a large growth investment?
Many variables factor into that decision. We spend a lot of time evaluating the micro market and the potential of the site itself. There are a number of underwriting metrics on which we rely, which we overlay with the capital markets environment and our return thresholds. We focus on making calculated investments where we’ve limited the downside.
How do you attract investors?
We have 506(B) and 506(C) retail level raises and those investors come in through our friends & family networks, from advertising campaigns, from word of mouth. We have many retail investors who have been with us for years and who have recycled their capital with us through a handful of different investments.
On the institutional side, it is my role to attract equity investors and that’s done through my existing network and through outreach and constantly seeking new relationships.
Is your portfolio still at $75 million in assets under management?
If you look at our existing portfolio upon completion and stabilization and apply a market cap rate to it, our AUM will be north of $100 mm in the next couple of years.
Any factors that differentiate your company from the competition?
The fact that our founders’ experience … is rooted in systems, softwares and IT is a differentiator and sets us up to scale efficiently and effectively. That’s important for a modern opportunistic developer.
And who is the competition?
There are plenty of small and midsized storage firms and there is enough opportunity for all of us. While we keep tabs on the competition, we are most focused on our investment thesis and the conviction we have in our own process.
