VanWest Launches Its Third Self-Storage Fund

The real estate investment company VanWest Partners launched VanWest Storage Fund III this week, allowing accredited investors to add one of the fastest growing real estate asset classes to their portfolios. The Fund will raise $150M in equity from individual and institutional investors, with a targeted capitalization of around $425M in assets.

The fund is targeting value-add opportunities throughout the U.S., which will allow VanWest to increase value for investors through renovations, expansion and management improvements.

Self-storage is still a highly segmented asset class with roughly 74% of facilities being owned by small operators. Many of these operators have inefficient management systems, resulting in lower revenue and higher expenses. VanWest is able to acquire these facilities at an attractive price and implement its management and marketing strategies to increase cash flow and add value for investors.

Self-Storage Market

While real estate has delivered strong performance across virtually all commercial property sectors over the past 12 months, self-storage continues to be the dominating sector in terms of price growth. According to the Green Street CPPI Index (which tracks current commercial real estate prices), self-storage has seen 64% price growth over the past 12 months and 69% growth from pre-COVID. The next highest growth real estate sectors over the past 12 months are strip retail, with 35% price growth and industrial with 28% price growth.

Demographic trends have been the primary driver behind the growth in the self-storage market in recent years, as a growing number of people are moving to suburban areas and into sunbelt states. Now, with homeownership becoming less affordable and more Americans being forced to rent, the demand for self-storage is expected to continue growing.

Why Self-Storage?

Low Correlation With Public Markets: Self-storage returns have historically had little correlation with equity and bond markets. The main reason for this is that storage units continue to provide consistent and predictable cash flow through all market cycles.

With many investors bracing themselves for a bear market, self-storage becomes increasingly attractive as a way to generate passive income and long-term growth.

Recession-Resistant: Self-storage has proven to perform well in a booming economy but, more importantly, the asset class is highly recession-resistant. Demand for self-storage has historically remained strong during recessions as individuals downsize their homes and rent for longer periods of time.

For example, storage growth remained relatively flat during the Great Recession - compared to a declination in the vast majority of other asset classes - and has soared in the wake of COVID-19.

Inflation: The latest data suggests that inflation may have already peaked, but many experts agree there will be a long cooling period. Self-storage has historically performed well during periods of high inflation and is likely to remain one of the most resilient asset classes.

Storage units typically have month-to-month lease terms, meaning operators can quickly adjust rents based on market conditions.

Investment Highlights

VanWest Partners has a proven track record of success in the self-storage market. The company has now closed two storage funds, deploying $130 million across 23 properties. So far, both funds have beat projections in terms of revenue and net operating income (NOI) as of the first quarter of 2022 updates.

VanWest Storage Fund III Terms:

• Minimum investment: $100,000
• Target investor IRR: 14% - 16%
• Target equity multiple: 2x - 2.25x
• Preferred return: 8%
• Target hold period: 6 - 8+ years

Access offering details from VanWest Partners

About VanWest 

VanWest Partners is an industry leader in the self-storage space and allows accredited individual investors the opportunity to benefit from the growth in this market through its managed funds. The company has an established track record with over $195 million in real estate assets.

VanWest’s wholly owned management company, ClearHome Self Storage, is also a top 50 self-storage facility operator in the U.S. and top 100 facilities owner in the U.S.

Accredited investors can learn more about VanWest’s strategy and current offerings by visiting the company website.

Photo by andrea crisante on Shutterstock