The first half of 2011 has shown the markets are healthy again for the self-storage industry, according to The BSC Group LLC, a financial firm that services this product type. The company has already originated $75 million in total transaction volume this year, and has a pipeline of more than $80 million in commercial mortgage-backed security (CMBS) loans.
Shawn Hill, a BSC principal, tells GlobeSt.com that after focusing on distress for the past few years, he’s excited to find that debt and equity capital necessary to bring these transactions to fruition is now readily available.
“We’re actively seeing borrowers with problems getting deals worked out, special servicers have gotten their arms around the methodology and have staffed up, and equity is looking to invest again,” Hill said. “The grease has hit the sprockets, and the machine is working.”
He says the company had been a traditional mortgage bank to the self-storage industry before the downturn, but the firm began to focus on distress to help their clientele. “You had borrowers who might have bought a property for $5 million and did it at 80 percent. Now the debt is coming due and they can only get a 65 percent loan. They’ll need to put up $1 million they don’t have,” Hill said. “These borrowers haven’t done really anything wrong. We wanted to find ways to help them stay in their deals to live another day.”
To this aim, BSC partnered with Dallas-based First Service Solutions. “We didn’t want to be the workout experts, so we found people who are,” Hill said. “As a result, we’ve done more than $100 million in workout transactions in self-storage.”
The BSC Group is involved in a number of deals, including funding for a recent $186 million deal, which Hill said he can’t discuss further, and another 10-property portfolio that got “extra messy,” with three special servicers and two more banks fighting over various mortgages on the properties. “We closed on the first transaction June 15, when the special servicer, Berkadia Commercial Mortgage, agreed to the payoff. The principal balance was $5 million, and they took $3.8 million,” he said. BSC identified a self-storage real estate investment trust to join a venture into the property with the borrower. “We’re in the process of cleaning up the rest of the portfolio in a similar fashion.”
Formed in 2009, Chicago-based The BSC Group LLC offers financial and loan advisory, mortgage brokerage and loan-workout solutions to commercial real estate property owners and investors, with a special emphasis on the self-storage market. Through its capital source network, the company provides clients with access to debt and equity financing for commercial real estate investments nationwide.