When a Property Doesn’t Fit the Mold, Break the Mold!
Selling any commercial property requires the right investor for the right asset, with the right business case. But the recent $91 million sale of Best Storage represented an especially unique case because of the non-traditional nature of the portfolio.
This eight-property portfolio consists of more than 7,000 units and 854,831 rentable square feet. Four of the properties are located in Fort Lauderdale, one is in Lauderhill, one is in Oakland Park, two are in Pompano Beach, and one has an annex in Deerfield Beach.
Michael Mele, first vice president investments in Marcus & Millichap’s Tampa office, connected the seller and the buyers.
Not your traditional storage portfolio
Mele knew this portfolio was unique. One major reason is that 12% of the income came from non-self-storage-related property. The mixed use nature of the properties might be a turn-off to potential institutional investors because the portfolio wouldn’t fit neatly into an existing network of self-storage properties.
“It was a unique portfolio because there were a few small retail units, a gas station on one of the lots, a small office building, and some industrial spaces that worked as outparcels to the existing facility,” says Mele.
The other limitation for institutional investors was that only one or two of the properties are REIT quality. The owner had built a very profitable portfolio, but he hadn’t done it with the same line of thinking as a REIT investor or an institutional investor.
Additionally, at $91 million for the full portfolio, the price was a significant barrier to entry. Michael knew he had to look to a specific buyer that would fit the vision of this portfolio.
Finding the perfect buyer
Despite the challenges, the Best Storage portfolio offered an incredible opportunity to the right buyer. For starters, a portfolio of this size for sale is very rare. The properties offered the ability to build a huge presence in self storage, in one sale and with far less cost and hassle than building the same portfolio one property at a time.
“We were able to really tell the story of this area, where opportunities like this one don’t come up very often. Because I had actually sold the property to the owner and had seen how the development happened over time, we had a detailed marketing package that showed how a buyer could really make this a launch point for future growth,” says Mele.
The sale required the perfect buyer who could overcome some of the challenges and capitalize on the portfolio’s unique advantages. Marcus & Millichap’s technology platform allows Mele to stay in touch with potential investors through his own network and through other agents. The collaborative nature of the company ensures that even when a buyer pool has natural limitations, agents have existing contacts with that pool and can easily present the property to the right buyers quickly.
In this case, Mele already had a connection to buyers who were looking to build a significant presence in the booming Florida market. The buyers already had a management presence in the area, and because the portfolio is situated in a limited geographic area, the buyers and their dedicated management staff can work with the mixed property types more easily. The buyers can leverage the economies of scale of having eight properties in close proximity and build a new base of commercial investments.
And thanks to Marcus & Millichap’s diverse expertise, Mele was able to bring in other specialists in the office, industrial, and retail spaces to help coordinate the sale. If the buyer decides to sell back those non-self-storage businesses, Marcus & Millichap has the asset-class experts to choreograph the best possible deals for all parties.
Mele says, “It’s gratifying to be able to find a creative solution like this one that creates success for everyone.”