Brownfield: In terms of impacting capital rates, REITs and large operators continue to pressure rates in Austin, Houston and San Antonio purchases, site acquisition and new development. Two examples: Public Storage is actively pursuing a number of new developments and site acquisitions in Houston; and Austin is seeing sub-6 percent cap rates for some class-A properties. In terms of buying activity, the greatest volume of purchases has been by strong regional players growing their platforms and buying the remaining value-add opportunities ripe for upgrades and expansion.
Since these major markets are so strong, there has been capitalization-rate compression of up to 100 basis points in secondary and tertiary markets elsewhere in Central Texas. But rates are still high enough to warrant consideration by smaller investors. This trend should continue for the foreseeable future, especially for communities still growing because of Eagle Ford shale activities. For long-term investors willing to hold beyond five years, I particularly like these markets since buyers can get decent, low, double-digit leveraged yields on the front end. Lenders are again showing interest in these markets, especially for well-located, stabilized properties and buyers who can put 30 percent or more down.
Goldman: In Arkansas and Missouri, we’re seeing more buyers from outside the industry diversifying into self-storage from apartments, ranch land and strip centers. Still, the majority of buyers are storage owners that are expanding their storage holdings.
Jones: In Oklahoma, the profiles of active buyers have been a mixed bag. We’ve seen one private REIT very active in acquiring six properties since the beginning of 2012. The largest operator in Oklahoma picked up two properties within the last 18 months. SecurCare Self storage, the second largest operator, acquired a four-property portfolio. So far this year, a small operator bought two properties. An out-of-state operator made a splash in buying a three-property portfolio at the end of 2012. All other transactions have been local, one-off transactions with no publicly traded REIT activity.
Trahant: The REITs are actively pursuing opportunities in North Texas as well as regional operators. While there are few local owners with funds to invest, the 7 percent (or sub 7) cap rate typically is a market where the large funds or REITs are the only buyers.
Ben Vestal is president of the Argus Self Storage Sales Network, a national network of real estate brokers who specialize in self-storage. Argus provides brokerage, consulting and marketing services to self-storage buyers and sellers and operates SelfStorage.com, a marketing medium and information resource for facility owners. For more information, call 800.55.STORE; e-mail firstname.lastname@example.org; visit www.argus-selfstorage.com .