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November 21, 2016

Self-storage offers passive investment, active growth

Courtesy / SVN|The Urbanek Group Hall's Self-Storage, with 91,344-square-feet of storage at sites in New Gloucester and Gray, was sold in a $4.8 million deal.

NEW GLOUCESTER — Self-storage facilities are a multi-billion-dollar industry.

Such facilities are part of the portfolio held by Mid-Coast Properties LLC, which has multiple self-storage facilities in Maine and elsewhere.

“Self-storage is part of their background,” said Nancy Carleton of William Raveis Carleton Real Estate. So when they see properties like the two that came on the market in New Gloucester and Gray, “they want to add it to their portfolio.”

Mid-Coast added to its self-storage portfolio with the purchase of 91,344 square feet of self-storage units at 41 Main St. in New Gloucester and 132 Portland Road in Gray.

In a deal that closed Sept. 30, the properties were sold by K&S Properties Inc. for $4.8 million. Carleton represented the buyer and Cam Woodford of SVN|The Urbanek Group represented the seller.

The selling company, owned by Maine residents, was in the business for two decades, Carleton said.

“The market is strong for self-storage, so it was great time to sell,” Carleton said.

“The self-storage market is hot in the Northeast and cap rates have remained compressed,” confirmed Woodford. “The industry is incredibly fragmented and ripe for consolidation.”

Roughly half of the facilities in the United States are owned by individuals or entities that own two or fewer facilities. Owners can take advantage of the economy of scale, managing larger portfolios and pay a premium for the properties, Woodford said.

“This is exactly what we saw in this transaction and a recent transaction in Sanford,” Woodford added. “I see this trend continuing. A lot of the new management technology coming out will make the self-storage industry even more capital-intensive and less labor-intensive, furthering the advantage for owners of large portfolios. This is a great time to sell a facility.”

Low direct costs, high demand

The properties, which are six miles apart and go by the name Hall’s Self Storage, are both in excellent shape, said Carleton. According to the property website, the offering contains 501 storage units and 21 commercial/contractor spaces that range in size from 100 square feet to 2,400 square feet. Amenities include drive-up storage units, climate- and humidity-controlled storage, digital video surveillance, motion-activated lights, surface parking spaces, office/warehouse and contractor units and outside gated and ungated storage for RVs, boats and trailers.

The New Gloucester site is also home to an automotive shop called European Motors, which leases space there and will remain onsite.

The purchase price is on par for the industry, said Carleton.

“For a successful business, with the amount of units they have and the structures being in good shape, both parties feel this was a fair price,” she said.

Carleton noted that minimal numbers of employees are required, aside from office managers to handle rentals and facility services, mainly in the winter to handle plowing and shoveling so that renters can get to their units.

According to a report on the industry by Integra Realty Resources, revenue in the industry is projected to hit $32.7 billion for 2016, up from $31.6 billion for 2015 and a reflection of the industry’s steady trend upward. The IRR report says demand for self-storage outpaces supply, largely due to an increase in multifamily construction, which drives renter demand for storage space.

“This leads many in the industry to believe there is plenty of opportunity for capital interested in this unique product type,” the report says.

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