Exclusive: Q&A with InSite Property Group

James McLean, Market Analyst at Radius+ presented questions to Zack Linford of InSite Property Group surrounding the closure of one of the largest self-storage funds ever raised.

Zack Linford
InSite Property Group

James McLean
Market Analyst, Radius+

The graph below displays the year-over-year percentage decrease in average price per square foot in the trailing 6 months. *Based on 10x10 Climate Controlled Units for the REITs.

Our latest Radius+ Insights report looks into the major institutions that remain bullish on self-storage, despite the current high-interest rates and lending market uncertainty.

Question 1. GLP Capital Partners (GCP), a leading global alternative asset manager that focuses on thematic investing across real assets and private equity, just closed one of the largest self-storage funds ever raised. Self storage has had a record year in 2021 when COVID-19 propelled a lot of drivers for self-storage demand. Do you think self storage has gained a lot more attention as an asset class from the resilience it showed in 2021?

With 25 years of general market outperformance in both total returns and volatility indexing, the self-storage asset class has traditionally been of interest to both institutional and retail investors.

While investment interest in the self-storage category is high given these market fundamentals, the reality is that investing at scale in the asset class can be challenging due to asset quality and grade.

Over the last few years, we have been focused on unlocking institutional quality assets at scale through development and off-market acquisitions.

Question 2. Daniel Ward, your Head of Asset Management, US at GCP stated that you assembled a scaled portfolio in “densely populated, high barrier-to-entry markets.” Radius+ data has reported a decrease in average price per square foot YoY when looking at the last six months of 2022 compared to the same months in 2021 in the top 25 markets for the big REITs. What led you to opt for saturated markets, as opposed to looking into tertiary markets with less supply?

What you’re talking about here is our primarily coastal-focused strategy. We think this approach will allow for attractive results given the density of our markets and relatively low-supply, compared to our peers.

Plus we believe the current macroeconomic environment is particularly conducive for well-capitalized platforms with sophisticated operating and technology capabilities like ours.

Question 3. Given the current economic climate and high interest rates, many speculate that it is difficult to raise funds or take out loans for projects. In the press release it mentions that you closed primarily on “(assets) primarily consisting of high-quality, newer vintage assets with strong local demographics.” Can you shed any light on why it made more sense to acquire existing facilities rather than develop from the ground up?

The real estate sector overall is experiencing headwinds today, with significant macroeconomic and pricing uncertainty, and we’re seeing fewer transactions overall in our space as owners wait to see how things shake out.

That said, we have a lot of dry powder to continue pursuing our strategy of targeting acquiring properties in low-supply markets with high demand and are optimistic that opportunities will continue to avail themselves over the next few quarters. Of course we continue to evaluate development opportunities as material and construction costs stabilize.

Question 4. In your press release you credit your ability to provide your self-storage customers with an exceptional customer experience via your consumer brand SecureSpace. How do you balance integrating automation with providing a “human” experience and accessibility to those who utilize your facilities?

SecureSpace benefits tremendously from the talented team members who work in our self-storage facilities. They’re instrumental in maintaining the security of our locations and providing a differentiated and personalized customer experience.

It’s one of our core objectives each day to maximize our customers’ experiences with the SecureSpace brand while making them feel confident in their choice to entrust us with their business. We leverage technology throughout the customer journey to maximize each interaction while also creating an atmosphere of safety and security.

So really, we believe technology is a net additive here in terms of customer experience, like the way AI in general can take a lot of the sort of, mechanistic workload if you will and let humans focus more time and energy on customers.

As an example, we maintain a supplementary in-house call center to ease the workload of store managers, giving them the ability to provide attentive and personalized service. We also provide our teams with workflow automation tools to inform prioritization so that they can further focus on making each customer’s experience the best it can be.

At the same time, we’ve implemented AI and facial recognition to enhance security and give customers peace of mind. And we offer a full mobile-native digital experience option so customers can self-serve and self-manage at their discretion.

The objective is to maximize the customer's experience with a mix of technology and personalized service.