Many self-storage owners have received unsolicited contact from would-be buyers who are interested in acquiring their facilities. Though these offers can be unsettling, they can also signal opportunity. Here’s guidance to help you navigate the waters of off-market deals.

Jeff Gorden, President

April 15, 2023

7 Min Read
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If you’re a self-storage owner, you’ve probably been receiving phone calls from random people trying to buy your facility even though it isn’t listed for sale. You may be getting postcards, letters with family photos, or even actual term-sheet offers in the mail. If so, you aren’t alone. In fact, under current market conditions, it isn’t uncommon to receive three to 10 unsolicited calls per week, often with little or no advance details.

For some owners, this can be disturbing, especially when the offers are persistent and come from multiple sources. Unfortunately, we live in a robust information age, and many of our personal details are available online. In some cases, investors buy or rent lists from companies that provide information about properties and owners in their target markets.

These inquiries are prevalent in part because values for all types of real estate have risen dramatically over the last decade, and subsequently, yields have fallen. There’s been particular interest in self-storage. Let’s look at why industry owners are getting such robust attention and how you might respond to these offers for off-market deals.

Some Context

To understand why there’s so much interest in self-storage specifically, let’s start by remembering the following headlines from the “The Wall Street Journal.”

  • Investors Flock to Self-Storage, Rental Housing as Safety Plays (March 10, 2020)

  • Self-Storage Bounces Back Ahead of Others as COVID-19 Eases (July 6, 2021)

  • Self-Storage Is the Pandemic’s Hot Property (December 22, 2021)

With the press highlighting a push by investors to get into the business, it’s worth discussing how big this market really is. If we factor in all facilities across the United States, from the newer, class-A urban stores to the older, class-C properties in smaller markets, we’re looking at about 60,000 sites, or 2 billion square feet. Sales data reflects that, on average, 5% of those properties will trade hands each year, which is about 3,000 properties, or 100 million square feet. If we valued all of those sites at an average of $100 per square foot, it would equal $10 billion in annual sales. In reality, last year brought in a record $20 billion.

For context, the combined market value of the six largest self-storage owners is $123.3 billion, which is five to 10 times the annual transaction volume. Some of the recent portfolio transactions closed by these operators amounted to as much as $1.8 billion. In addition, there are a substantial number of private-equity firms and high-net-worth investors with goals to place more than a $100 million into self-storage. With all this competition, it’s easy to see why some investors look for an edge by reaching out to owners directly.

Considering Offers

So, when should you start taking these calls seriously? The fact is this may be the best time ever to sell a self-storage property, even though the most common reasons owners decide to sell are life events like death, divorce, partnership dissolution, retirement or debt maturity. Whether any of these scenarios apply to you or you’re simply a seller of opportunity, there are some factors to consider before engaging in a transactional conversation. These include:

  • Whether you need cash flow or are concerned with how you’ll replace the cash flow from your property

  • The tax implications of selling

  • The identity implications of selling

For what it’s worth, I’ve found that last consideration to be particularly relevant to single-site and other small self-storage operators.

Though it may not seem like it at times, there’s a person on the other end of the phone line. In all likelihood, the anonymous buyer behind each solicitation call falls into one of the following categories:

  • Wholesaler: These folks profit by tying up a property and then quickly selling it or their position to a “real buyer.” They get you to agree to a low price and are rarely the person at the closing table. They also probably can’t offer you the best deal.

  • Value-add buyer: These investors purchase properties to make improvements and sell them for a profit. If your self-storage facility requires work you aren’t interested in doing, someone from this group could be a viable buyer for you.

  • Buy-and-hold investor: This category includes investors with a longer-term strategy. People in this category buy properties for cash flow, then sell them much later, often at a life-event moment of their own.

  • Broker: It’s common to be contacted by brokers on behalf of buyers who are trying to make an off-market deal. This can be advantageous for investors who want to avoid a bidding war, particularly in competitive markets. It can also work well for you as the seller, as the broker can guide both parties through the usual transactional milestones. In addition, these offers are more likely to meet fair-market value.

If you’re interested in moving the conversation further, here are some good questions to help you vet and qualify buyers:

  • Are you currently in the self-storage business?

  • Where are your properties?

  • What other types of commercial property do you own?

  • What properties have you recently acquired?

  • How do you plan to finance the purchase?

Don’t settle for vague responses. Press for specific answers that indicate the buyer can perform and has a history of doing so. The last thing you want is to get tied up with someone who doesn’t know the ins and outs of self-storage, the market or, more importantly, how they’ll close the sale.

A Fair Deal

Getting a fair self-storage deal is really the result of being an educated investor. If you’re active in the market, you may have a sense about what’s a good value and favorable terms for your property. If you haven’t been a market participant in a while, you may be relying on old information and should consider engaging a real estate professional.

Connecting early with a pro lets them evaluate an incoming offer. A broker can also help determine if selling now is the right move for you and aid you in finding your next property if you do decide to sell. In any case, it’s helpful to have someone in place to act as your go-between with a potential buyer.

Even if you’ve already discussed an offer for your property, it isn’t too late. If you tell a purchaser you’re bringing in a broker and it halts the process or they discourage you from doing so, it’s a big red flag, and you should be very wary of the offer as well as the buyer.

When vetting brokers, here are some qualifying questions to ask:

  • Do you specialize in self-storage?

  • How long have you been in business?

  • What other types of properties do you sell?

  • How many self-storage properties have you sold? What about in my area?

  • What does your marketing and transaction process look like?

  • Are you a single broker, or is there a team behind you?

Again, press for specific answers that indicate the candidate can perform on your behalf and has a track record of following through.

Seller’s Market

The commercial real estate investment market has been on fire for years, and self-storage has been the darling of the recent boom, especially since 2020. Low inventory and high buyer demand have created a seller’s market. Keep in mind, though, that while many of these cold-call offers can be legitimate, they probably won’t get you top dollar. Accepting an unsolicited offer is entirely up to you, but it’s always recommended that you work with an experienced, self-storage broker to ensure you aren’t being taken advantage of.

If aren’t interested in an offer, you don't have to respond! This is especially true for impersonal pitches that come from large investors. However, if a solicitation comes from a local buyer or broker, a reply is always appreciated, even if you intend to reject it. A polite, “Thank you, but I’m not interested,” is usually the best response.

Jeff Gorden is president of the Gorden Cos., a regional group specializing in self-storage investments. He’s been active in commercial real estate for more than two decades, and has experience in retail, office, industrial and self-storage. He’s also president of the Arizona Self-storage Association and a broker affiliate for Argus Self-storage Advisors in Arizona and Nevada. For more information, email [email protected].

About the Author(s)

Jeff Gorden

President, Gorden Cos.

Jeff Gorden is president of the Gorden Cos., a regional group specializing in self-storage investments. He has been active in commercial real estate for more than two decades, and has experience in retail, office, industrial and self-storage. He’s vice president of the Arizona Self Storage Association board of directors, and a broker affiliate for Argus Self Storage Advisors in Arizona and Nevada. For more information, email [email protected]; visit www.gorden-group.com.

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