AAA Storage Development Fund

Texas & Florida

Read More

Project Details

Direct Equity Source is proud to offer its AAA Storage Development Fund , a diversified investment fund targeting several self-storage & office/warehouse light industrial development in high growth markets.

Key Highlights of the investment opportunity include:

The Fund offers investors the opportunity to participate in the development of an identified and diversified portfolio of self-storage and office/warehouse flex properties with an experienced and successful Operator. The Fund’s strategy is to acquire, develop, lease up and sell properties in high growth markets to provide attractive returns to investors.

Experienced Sponsor with over 30 years of experience and a history of providing an average internal rate return to investors of 19%

An identified pool of entitled development sites in Austin Tx, San Antonio Tx, and Tampa Fl that are ready to begin development when acquired by the Fund.

Growth strategy intended to leverage the value created by the strong yield on cost in self-storage and office/warehouse that drives above average returns for development of these property types.

Track Record and Experience

AAA Storage LLC and its affiliates began developing self-storage facilities in 1992 and since its inception have developed and exited 90 properties totaling approximately 6 million square feet with a value in excess of $450,000,000.  The Sponsor is an integrated real estate company providing land acquisition and entitlement, site planning, development, construction management and property management services.  This integrated approach utilizing dedicated contractors and construction crews allows the Sponsor to optimize a site’s potential, control costs during development, and provide above-average returns to investors.

Opportunity and Strategy

The yield on costs (NOI vs. cost to construct) in self-storage and office warehouse development exceed all other sectors in real estate, and support significant value creation.  This fact combined with the historical NOI growth in both sectors makes the development of self-storage and office/warehouse properties an attractive investment. 

The fund will develop 8 sites, all of which will include self storage. Five of the eight sites will also include an office/Industrial flex business parks. The Sponsor believes that the current economic environment provides the opportunity to acquire and develop properties at attractive prices and believes that the Fund will be able to make investments that provide attractive returns to investors.

The Self-Storage Industry

Growing demand for storage units:
According to IBISWorld, the self-storage industry in the United States is projected to grow at an annualized rate of 3.7% to $40.7 billion over the five years from 2021 to 2026. The demand for self-storage has been growing steadily over the past decade as people accumulate more possessions and living spaces become smaller.

High occupancy rates: The self-storage industry has consistently high occupancy rates. According to the Self-Storage Association (SSA), the national occupancy rate for self-storage facilities in the United States was 91.4% in 2022, up from 90.2% in 2019. This indicates a strong demand for storage units.

Resilience during economic downturns: Self-storage has proven to be resilient during economic downturns. According to the National Association of Real Estate Investment Trusts (NAREIT), the self-storage sector had an average annual total return of 17.43% from 1994 to 2019, compared to 10.18% for the S&P 500 index. During the Great Recession, self-storage REITs outperformed all other real estate sectors.

Favorable demographics: The aging of the baby boomer generation has led to an increased demand for storage units as baby boomers downsize. In addition, millennials and Generation Z are increasingly using self-storage as they transition into adulthood.  As a result, demand for self-storage facilities has continued to exceed supply and, on average, existing storage facilities increased in value by approximately 133% during the 10-year period from 2012 to 2022.

Institutional Investment: There has been a significant increase in the acquisition of existing facilities by institutional investors over the last 5-8 years. This influx of institutional capital has driven premium values for well-located and well-built properties.

Office/Warehouse Flex Business Parks – Overview

Office/warehouse flex space combines office and warehouse spaces in single story buildings.  Its versatility supports a wide range of uses including companies in the construction, home services, manufacturing, e-commerce, logistics and medical industries.  Its wide range of users provides a larger population of potential tenants, and therefore supports quick lease up, stable economics and strong cash flows.

Increased demand for e-commerce: The COVID-19 pandemic accelerated the shift towards e-commerce, which has increased demand for office/warehouse flex space. According to CBRE, e-commerce sales are projected to reach $900 billion by 2023, which will continue to drive demand for warehouse space.

Rising demand for last-mile delivery: The growth of e-commerce has also increased the need for last-mile delivery. This has led to increased demand for office/warehouse flex space that are located in urban areas, which are closer to customers.

High occupancy rates: The office/warehouse flex space sector has maintained historically high occupancy rates. According to JLL, the national vacancy rate for this sector was 6.1% in the first quarter of 2021, which is lower than the overall industrial vacancy rate of 6.9%. This indicates a strong demand for this type of space.

Resilience during economic downturns: Office/warehouse flex space have proven to be resilient during economic downturns. According to NAREIT, industrial REITs had an average annual total return of 11.28% from 1994 to 2019, which is higher than the overall REIT average of 9.87%. During the COVID-19 pandemic, industrial REITs outperformed other REIT sectors.

The Fund will develop office/warehouse flex space on land adjacent to its self-storage facilities when market conditions, demand, and property size allow. Developing both property types on one site allows site and infrastructure costs to be shared and improves the overall cost efficiency of development.

Strategic Advantages

Experienced Sponsor with Successful Track Record

AAA Storage, the Fund’s sponsor has developed over 6,000,000 square feet of self-storage and office/warehouse flex space with a value in excess of $450,000,000.  The Sponsor’s average internal rate of return to investors across  90 projects is 19%.

Inquire Below