Choosing a Broker for Self Storage

8 Replies

I'm a first time self-storage owner; I bought an underperforming site 2 years ago, brought on 3d party management who doubled NOI, and now I've got 3x as much equity in the property as I put into it ($650k cash into a $2m purchase, which is now probably worth ~$3.5m). I have the opportunity to sell now at a big profit or to maybe pull cash out with a refi, and I have been doing some hard thinking about what to do with the proceeds (factors are the usual: self-storage market cycle, cash flows, cheap credit, other asset classes, etc.) or whether to just ride my current cash flow for a bit longer. But that is a question for another thread...

What I'm wondering in this thread is how to choose a storage broker if I decide to sell and trade up to a new deal. The broker I used to acquire my current site was terrific. I found him by accident; I was new to storage and just cold calling people about listings, I called his partner about a listing and left a message, this guy called me back and said "that deal's gone, what are you looking for," and off we went. He was young but relatively experienced, had a very conservative valuation approach and talked me through the ins-and-outs of storage as an asset class (I've been in SFR for 20 yrs but this was my first CRE buy), and to his credit just kept telling me "that deal's too expensive, it's not right for you." I am an immediate fan of any salesman who tells me not to buy something. He wasn't just looking to close a deal but genuinely finding one that made sense for me and my goals.

The complication is he's at a small regional firm.  My intuition is that means his reach on the buy and sell sides is more narrow than that of some of the larger storage brokerage groups (Marcus & Millichap, Mele, etc.).  I've received cold calls from a couple of those larger places looking to represent me in selling my place and finding me a new, bigger one, and again, my intuition is that they'd have access to a wider network with more buyers to maximize value on my sale, and more sellers to get me into a deal on the back end.

I had a meeting with my original broker and his partner this week to talk all this through and they responded to my concerns.  Their pitch was that all the brokers basically have the same databases of players in the field, the buyers will find the deals, and they'll get the same value for my place as any big shop.  On the buy side, their niche is regional, so they'd have access to plenty of sellers in their part of the country, and have done some deals outside their region.  (I'd be interested in a national search, and my current property is not located in their region.)

If I decide to pull the trigger and sell my storage site, I need to decide how to proceed with representation.  I'm still a relative novice in storage, though I've got my feet under me pretty well, but I know I would still really value the "hand-holding" and genuine attention to what's in my best interests that I'd get from my first broker.  I have the impression, from my couple of calls with the larger brokerages, that they wouldn't be quite as discriminating in valuing new deals on the buy side, but that they have buyers lined up to buy my place and could get great value for it.  I also have the impression, talking to both the big brokers and my last guy, that everybody's first move is to bring new deals coming on the market to their own repeat buyers, and to bring me the properties they represent with their sellers.  The network sizes, in other words, seem to have real meaning in terms of how many people see my deal and how many deals I will get to see.  But in the internet age, maybe everybody sees everything?

TL/DR: Anybody have any perspective on the relative merits of national v. regional self-storage brokers they can offer me? I want to continue to work with my guy but worried about leaving $ on the table and not having access to the same quality deals on the back end...

Hi @Christopher Brown congratulations on accidentally finding a deal in an asset class you had no experience or much knowledge about and making tremendous $ with it!

One of my friend recently went through selling his small multi (16 units) in small market in NC and went through same Marcus & Millichap broker for purchase in same market for larger property (32 units).  He was really pushed by this broker on both sell and buy.  Your mileage may vary but it is quite possible but consider that for what it is worth!

BTW, I am looking to get into self storage myself and would dm you if I can pick your brain somewhat!

Ha - yea, I guess that's not a totally unfair summary!  Absolutely send me a DM - happy to share my experience...

@Christopher Brown A lot to unpack there. I think if you’re looking to potentially sell the property, then I think your current broker would do a fine job. For the record i own self-storage but haven’t sold any of them.

Most Argus brokers would do great I’m sure or any of the storage guys you are considering too.

As far as buying, I think you may need to narrow your focus a bit more. If you go to one of the big guys and say you are open to anywhere between $4-7m then I don’t know they would know how easily to get you something unless it’s already listed with them.

That’s probably generalizing, but I think you get my point. I don’t know if that helps, I just think you need to determine what you want and then go from there.

Just curious, what 3rd party did you use?

Extra Space.  They've done a great job: their projections from two years ago have been spot on; they pushed occupancy til we were stabilized and then pushed rates, and their pricing algorithm seems really effective; their communication has been really good both from national office and from my district manager; and they've managed personnel at the site well.  

They are expensive (esp. their payroll and marketing), and they required I put in a big chunk of cash to get the site up to their specs (signage, office space, lighting, fire extinguishers, etc.).  But it's paid off and the results have been outstanding.

No expansion - no room on site for it.  We've looked at an adjoining property that's vacant, but I'm absentee and don't think that taking on development at a distance is the right move for me.

I'm a former multifamily broker who only represented sellers, which is the same as Marcus & Millichap's strategy. Good brokers at M&M do a great job of driving a marketing process and getting buyers to compete, but not all brokers at M&M do a great job.

Honestly, your broker is not wrong in saying that if you put a desirable property on LoopNet and CoStar it's going to get tremendous interest. Understanding that you want a national search, do you think he'll be able to find you more deals in the future?

Remember, he walked you through the process and helped find you a deal that's going to make you a lot of money. It often pays over the long run to be loyal and give that same broker the first crack at selling the deal. If he doesn't get you your price, then go hire a bigger firm. Good young brokers grow with their clients. 

Finally, the national firms don't care about buyers; they make their money representing sellers. So if you're looking for someone to provide "consulting" on the buy side, talk to your regional guy about a retainer fee for the acquisition so they aren't dipping into the selling brokers' fees.