21 Apr Regency Affiliates, Inc. Makes First Self Storage Investment in Pennsylvania
By Alex Hassel, Storage.com
A new player has joined the self storage investment game. New York City-based Regency Affiliates, Inc. recently announced its majority joint-venture interest in the acquisition of five standalone self storage facilities in Harrisburg, Pa. The joint-venture paid $35 million for the locations. Together, the facilities add up to around 330,000 rentable square feet with more than 2,500 total climate-controlled and standard storage units. The facilities will operate under the brand Storage Depot Self Storage.
Laurence S. Levy, Regency’s Chairman and CEO, says the company carefully selected the facilities in the region. In 2015, the combined revenues for the buildings were in excess of $3 million.
“We believe it’s a strong market,” Levy says. “The population is growing, the area the company invested in has great presence and great growth outlook.”
In addition, the facilities themselves were appealing. Levy adds, “They are physically attractive, good locations, and provide the opportunity to increase utilization, improving the current rate of occupancy.”
Regency is not disclosing the sellers’ names at this time.
So why is Regency leaping into the self storage industry? Levy says there’s so much potential in the investments made in Harrisburg.
“Self storage as an asset class fits squarely within our investment objectives of investing in assets that generate attractive, predictable, and sustainable returns on capital. The business requires low operational intensity and has modest capital expenditure requirements while offering high margins and strong potential for revenue growth through both rate increases and increased utilization. Moreover, the facilities have long useful lives and have proved to be recession-resistant.”
The purchase price and related transaction expenses were financed in part with the proceeds of a nearly $25.3 million non-recourse debt financing with a ten-year term, 4.95% fixed interest rate, and 30-year amortization commencing after a four-year, interest-only period. The balance of the purchase price, the transaction expenses, and initial working capital were financed by an approximate $11.2 million capital contribution from Regency to the joint-venture purchaser.
Regency’s new facilities will be operated by SSCP Property Management LLC, also a minority joint-venture interest. “The principals of which have proven experience in managing self storage facilities for profitability and growth, and through our joint venture structure, SSCP will participate in the growth at Harrisburg,” says Levy. “We are excited to have established a working relationship with SSCP and look forward to the possibility of investing with them in additional self storage facilities.”
Regency’s other assets include:
- An indirect 50% interest in the 717,000-square-foot facility Security West complex located on 34.3 acres in Woodlawn, Md. The facility is occupied under a lease expiring in 2018 by the United States Social Security Administration.
- An indirect 50% interest in Mobile Energy, which owns and operates an energy facility located on approximately 11 acres of land in Mobile, Ala. The facility supplies up to 61 megawatts of co-generated steam and electricity for use in the Kimberly-Clark’s mill’s operations under a 15-year agreement signed in 2004.
Levy adds that Regency will be keeping an eye out for other storage investments in the future. “We have previously invested in warehousing and distribution, so we’re somewhat experienced in this space,” he says. “We’re partnering with a good management team company and will have the opportunity to identify and invest in other good assets.”
Photo used with permission from Laurence S. Levy, Regency Affiliates, Inc.