The self-storage industry has quietly outperformed all other commercial real estate sectors over the last fifteen years, with an average return of over 20 percent. The asset class has consistently performed throughout economic cycles, exhibiting robust growth in strong economies and remaining resilient in downturns.
The fundamentals for self-storage continue to be positive with the trends in household formation and mobility leading to increased demand for space. To take advantage of these favorable investment conditions, Leon Capital Group launched its self-storage platform in 2014.
The Self-Storage Platform has three business segments:
While demand for self-storage units has grown considerably over the last ten years, there has been little new development since the great recession. According to industry reports, there were 600 facilities completed in 2016, compared to the average of 2,100 facilities per year from 2000 to 2009. This dearth of new construction has benefited existing facilities which have seen occupancy and rent numbers at or near all-time highs. These market conditions have caused many industry veterans to proclaim that development should be a profitable strategy for years to come. With in-house site selection, development, and construction expertise, we are uniquely positioned to move quickly and take advantage of opportunities capable of delivering above-market returns to our investors.
Despite strong industry fundamentals, traditional financial institutions are becoming increasingly conservative when lending on self-storage developments. To fill the gap this has left in the market, we began offering debt capital to developers of Class A self-storage facilities in 2018. Our financing platform provides developers a unique combination of high-leverage, non-recourse financing, and a guaranteed exit. We lend on projects through development and acquire the facilities once they are completed.
Ownership within the self-storage industry is highly fragmented with over 85% of existing facilities held by owners with portfolios of four facilities or less. This fragmented ownership creates opportunities for sophisticated investors to acquire existing facilities and drive outsized returns through operational efficiencies and carefully executed capital improvement plans. We focus on highly desirable, growing communities when selecting potential existing storage investments. We execute our acquisitions strategy by acquiring existing facilities, certificate of occupancy deals, and development projects in the process of being entitled.
Round Rock, TX