The Colorado-based real estate investment firm Spartan Investment Group announced the launch of its real estate investment fund today, Spartan Storage Fund 1. The fund has a target equity raise of $150 million to fund and acquire $400 million worth of value-add self-storage facilities in the U.S.
The self-storage real estate investment fund allows accredited investors to benefit from a portfolio of 60+ self-storage assets, with a focus on secondary and tertiary markets that are complementary to Spartan's existing portfolio of properties.
Self-storage market: The self-storage market has seen growing interest among investors recently. Scott Lewis, CEO of Spartan Investment Group, said, “The self-storage industry has been experiencing significant growth over the last couple of years, supercharged by the pandemic, and captured the attention of investors who want to diversify their portfolio.”
People have been more inclined to move since the beginning of the COVID-19 pandemic as millions have transitioned into remote working environments. However, the rising cost of housing has forced many people into smaller spaces, making it difficult to keep all their belongings at home. This transition has created a surge in demand for self-storage units in several growing markets.
Despite the urgency, many municipalities have moratoriums on new self-storage facilities, allowing demand to continue outpacing supply. As a result, cap rates compressed by 85 basis points for self-storage real estate in the last two quarters of 2021.
Self-storage and inflation: Rental income for self-storage outpaced inflation in 2021, with average rental increases of 12.7% year-over-year. The asset class is uniquely positioned to keep up with rising costs since units are leased on a month-to-month basis. Operators are able to adjust rents every 30 days if needed to avoid shrinking margins.
Spartan’s investment strategy: The self-storage market is ripe for consolidation. Roughly 70% of self-storage facilities are mom-and-pop shops that have been slow to raise rents to keep up with the market. Spartan Storage Fund 1 intends to capitalize on this opportunity by acquiring these underutilized assets and implementing a value-add strategy through renovations, expansion and improved operational efficiencies.
The firm’s value-add strategy provides investors with the opportunity to realize higher total returns through increased cash flow and forced price appreciation.
“When you invest in Spartan Storage Fund 1, you're not only investing in our collection of hard assets. You’re investing in the Spartan approach with a track record of success and strong returns, and a philosophy of transparency and trust with our investors,” said Spartan CIO, Ryan Gibson. “The Fund isn’t changing how we invest in self-storage real estate, it's providing a more efficient vehicle with a better experience and potentially stronger returns for our investors that will allow our team to do what we do best, better.”
Spartan Storage Fund 1 investment terms: The fund is available to accredited investors and is split 70/30 in favor of investors. Tax benefits of investing in the fund will be the same as those of a single asset investment.
- Minimum investment: $50,000
- Target annualized return: 15% to 20%
- Target equity multiple: 1.7x to 2.2x
- Target hold period: 4 to 6 years
Find more information on Spartan Investment Group’s website.
About Spartan Investment Group: Founded in 2014 and based in Golden, Colorado, Spartan Investment Group is a privately held real estate investment firm specializing in the self-storage industry. With an unwavering commitment to creating value through values, Spartan’s network of over 5,000 investors has raised over $140 million to acquire nearly 60 facilities, with more than 20,000 units and $458 million in assets under management across the United States — all in under a decade.
Photo: Courtesy of Spartan Investment Group
