REAL ESTATE - Clarion Partners has plans to acquire $50m-$100m (€40.7m-€81.4m) in self-storage properties on an annual basis. This capital will be invested on behalf of a mixture of commingled funds and separate account pension fund clients.
Clarion managing director Jeb Belford said: “Our belief is that self-storage properties are attractive and in many ways act like apartments from an operation standpoint. The property is leased to many individual people. The leases have the same time-frame as multi-family and rents can be increased in a timely manner.”
There is one added benefit that self-storage enjoys in the market today: higher returns. Belford said: “It is our opinion that cap rates on self-storage assets are 200 basis points higher than apartments.”
There are some people in the pension fund real estate industry that think one day self-storage could become the fifth property type to be considered core by NCREIF. Belford said, “I think this could happen in the future if more real estate managers were to start and continue buying more self-storage assets.”
Clarion Partners has acquired a new self-storage property. The real estate manager paid $8m in an all-cash deal for the Metro Self Storage facility in Lake Zurich, Ill. The property is located 32 miles northwest of Chicago.
The property totals 69,000 square feet and holds 514 individual units. The asset opened for business three years ago and had occupancy in the high 80% to low 90% range when the deal was completed. The property is an infill location. There is no room for future development. It’s near residential and commercial projects that includes a major retail development with a Home Depot and Costco.
Clarion Partners acquired the property with the assistance of Flint Creek Partners. The Illinois-based company has been hired by Clarion to look for self-storage assets.
There has not been a specific amount of equity set aside for this relationship. It’s more of a deal-by-deal arrangement. Flint Creek’s Managing Director John Nikolich said: “We got out into the marketplace and try to find transactions. We think bring them back to Clarion for an approval.”
Clarion Partners looks for properties where there is plenty of demand and there is a good deal of population and job growth. There would include areas along the East and West Coasts.
