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Ask the Broker - TX Self Storage

This video series provides real-time insights into the issues impacting the commercial real estate industry.

How You Should Handle Unsolicited Offers For Your Property


Hi this is Danny Cunningham with the Karr-Cunningham Storage Team here in Fort Worth, TX. It seems that every storage owner I talk to or meet with lately tells me that they are getting bombarded by folks trying to solicit off-market offers to purchase their facility.  Whether the interest is coming from a neighbor down the street, an existing storage owner or investor, or a broker, it's clear in every case that the owner is receiving way more calls than usual. 

The first question I get from these owners is:

"Why are so many people calling me?" The short answer is that storage properties are in high demand! Self-storage as an asset class proved its ability to weather economic uncertainty once again during the Covid-19 pandemic, and all signs point to continued growth and stability in the sector.  Combine that with historically low interest rates for acquisitions, and you have a perfect storm of investors looking to purchase their first facility or grow their existing portfolio. 

That being said...

How is COVID-19 Impacting Rates and Leverage?


Today we are discussing the capital markets in broad strokes with some finer points relative to the self-storage asset class. Specifically, with COVID, where are we today? Is the market influenced exclusively by where treasuries are? Is it sponsor specific? Is it geographically based? What about rates?

Broad Strokes

With a broad stroke, rates have relatively been unchanged from pre-COVID to the current environment. And everyone sees that treasuries have retracted quite a bit. Prime has retracted, Libor is at near zero, but spreads have widened out given the inherent risk that we are in an uncertain environment.

That being said...

Ask The Broker, How is the Size of the Loan Impacting Rate and Leverage?


Hello. I'm Brandon Karr with Marcus & Millichap. I lead the Karr-Cunningham Storage Team in our Fort Worth, TX office and in our latest 'Ask the Broker' video, we wanted to talk a little bit about how interest rates could impact the value of your self-storage real estate moving into the 2nd half of 2021 and beyond.

During its April 27 policy meeting, the FOMC left interest rates unchanged and reaffirmed its commitment to keep rates low until the economy has recovered more fully from the pandemic. This is good news for owners and sellers of income producing real estate because - all things remaining equal - low interest rates result in higher property values, and higher rates equate to lower values. With that said, rates are already at historical lows and the general consensus is that they will move higher as the economy gets back to pre-COVID levels of activity.

That being said...

How Do the Capital Markets View Self Storage Compared to the Rest of the Commercial Real Estate?


As self-storage brokers, we spend most of our time in the primary markets throughout Texas, but one of the interesting things that we have seen, and we have kind of touched on some of this relative to the capital markets, is an interest in secondary markets. We recently closed a portfolio out in the Permian, in West Texas, not too long ago. This was a unique transaction in the sense that the asset quality was high across the board. There was a demonstrable cashflow that had been very predictable for a number of years, but, as many folks who invest and live in Texas, we understand that the Permian is severely influenced by the global oil and gas industry.

How is Covid 19 Impacting the Capital Markets, and Where are the Capital Markets Headed?


Today we are discussing the capital markets in broad strokes with some finer points relative to the self storage asset class. Specifically, with COVID, where are we today? Is the market influenced exclusively by where treasuries are? Is it sponsor specific? Is it geographically based? What about rates?

Broad Strokes

With a broad stroke, rates have relatively been unchanged from pre COVID to current environment. And everyone sees that treasuries have retracted quite a bit. Prime has retracted, Libor is at near zero, but spreads have widened out given the inherent risk that we are in an uncertain environment. 

That being said...

Meet Our New Partners - Metropolitan Capital - Now a Part of Marcus & Millichap Capital Corporation


Today we are discussing the capital markets for not just storage, but everything that's going on in the marketplace in general right now. And, we're here in the new Dallas office and part of the Marcus & Millichap Capital Corporation now. I thought it'd be a good opportunity to introduce our partners, Metropolitan Capital, to our owners and operators, give them a little history, and tell them what we do together and why we're here and all that.

To start...

Ask The Broker, Is Now A Good Time To List And Sell My Self Storage Facility?


The short answer is yes. Pricing for self-storage facilities is as attractive now as it has ever been for a few different reasons. The first comes down to simple supply-demand. There are fewer properties on the market right now than there have been at any point in time in the past five years. And there are actually more buyers than we have ever seen before. Partially, you just have the institutional type investors who have to place X amount of equity every single year into self-storage properties.

And then you also have investors who are typically in the hospitality or the retail airspace who are trying to diversify because those properties might not be doing as well and they see this recession-resistant asset class, like self-storage as a far more attractive opportunity. And last, but probably most importantly, buyers right now can just get debt at such a cheap rate that it just makes sense to place it into self-storage....

Why Is Self-Storage Stable In A Downturn?

Danny Cunningham:

At Marcus & Millichap, we have a lot of brokers who specialize in different product types, whether it be hotels, retail strip centers, or apartment complexes. And they'll come to me and say, "Why is self storage so popular? And the main reason is self storage does pretty well, even when we're in economic downturns. And if you think about it, it really makes sense because people use storage when there's a disruption in their life, whether it be downsizing, divorce, a death in the family. All of those are reasons why someone would need to store their extra stuff. That's also a big reason why the self storage industry as a whole has seen such a boom over the last five to seven years. You have all of this capital coming from investors who used to only look at apartment complexes, retail, hotels, and the like. Now, they're looking at self storage facilities because they know how profitable they can actually be.

What Should A Buyer Look For In A Self Storage Investment?


Let's talk about due diligence. Let's say someone's found this piece of property and it's a decent location and so forth. What would be the suggestion for someone who is looking for, and walk us through a process that you go through?

Assuming that you've found a property that you think might be an attractive acquisition opportunity. The main thing to look at is the income stream. What's the seller's income stream? And then more importantly, what is your income stream going to be as the buyer? Because more often than not the seller, certainly, when you get to smaller, tertiary markets, oftentimes you have owners who are running the property themselves. If you're a real estate investor, as opposed to a self-storage operator, you may not be running the property yourself. You may be...

How Are Low Interest Rates Impacting My Property?


People today wonder about interest rates and how they impact their property's value. Some owners also ask whether or not we could sell their property for more money now that interest rates have reached near record lows. The answer to this question is that while we definitely need to look into the situation more deeply, the suspicion is that yes, it is quite likely that we could get more for the property now than we could two years ago because of the low-interest-rate environment. That is an interesting development because this particular facility is not generating any more income today than it was two years ago. It is fully stabilized and has been for quite some time, but the reality is that when a buyer looks into purchasing a property, one of the things they have to look at is the cost of capital...

What Is The Value Of The Marcus & Millichap Platform


Clients engage us to take their property to market. What they expect is to have as many qualified buyers as possible look at the deal, look at the package, look at the video, and spend time on it and really try to understand it. And one of the benefits of engaging Karr-Cunningham storage is that we are backed by the Marcus and Millichap platform, and we have got over 80 offices across the whole United States. And we ultimately have an unparalleled track record when it comes to self-storage, transaction volume across the state. In addition, the Karr-Cunningham storage team has been the number one Texas self-storage investment brokerage for the past eight years running. Part of the reason for that is the Marcus and Millichap network. Many, many, many of the deals that we do are with our other colleagues in other states, in other offices. They bring their buyers to the table. People wanting to get into...

So, You're A Broker?


Many times when I introduce myself to storage owners and I tell them that I'm a broker, they say something along the lines of, "Oh, so you want me to sell my property?" And the truth is that I have no idea if it's even the right time for you to sell.

Of course, as a broker, I'm only going to make my commission when someone buys or sells, but those transactions oftentimes start with just a conversation that happened five years ago, because I'm the one that's out here on a day-to-day basis, meeting and talking with storage owners across the state. I'm the one that's out there understanding the trends, the challenges, the threats, impacting the industry....

What Is Going On With All The New Construction?


If there's a question right now that seems to be on everybody's minds, it is how is all this new construction going to be impacting the self-storage industry? Well, admittedly, there are a number of new facilities being built and it is something that is important to understand. Well, as specialists in the market, we have our finger on the pulse of what is going on. And one of the requirements of having a finger on the pulse is understanding not just what is going on on the macro level, but what is going on at a granular level. Self-storage facilities are a one-mile and three-mile business. It is important that you understand what is happening in your market, not the market as a whole, but rather your specific trade area. And that is what we do at Karr-Cunningham Storage. We are helping you understand your competitive landscape, your demographic profile, your investment to help you make the right decision based on what is happening to your facility. We look forward to hearing from you. If you would like to know more, you can find us at

What is the Replacement Cost of a Self Storage Facility?


I was talking to a new investor who had not yet entered the Texas self-storage investment space, and he was primarily interested in distressed opportunities. And when we talk about distressed opportunities, we talk about properties that have been mismanaged for one reason or another, maybe something has happened. Either way, they are not making any money. We do not necessarily need them to be owned by the bank, but they are nevertheless not making any money. So how do we value them? How do we look at them? How can we give an owner an understanding of what the market may be willing to bear if they chose to sell it? And that was part of the conversation I was having with this investor. The topic we discussed was that of replacement costs.

Replacement cost is a ...

How Is Cash On Cash Return Relevant To Me?


A client of ours called us the other day and we were looking at loans. She was thinking about buying one of the properties that we had listed and so I thought I would bring this topic here to discuss as well, that topic being cash on cash return.

So what is cash on cash return? How is it relevant to me, et cetera? Well, a couple of weeks ago we talked about cap rate. Cap rate is the rate of return that a buyer would generate if they were to purchase the property all cash. Most properties don't get purchased with all cash. Most buyers do in fact, go out and get a loan.

The cash on cash return then becomes far more important to them as...

Is Cap Rate Important When Analyzing Your Storage Facility?


Somebody asked me the other day about cap rates and whether they're important and so forth. And we admittedly said that cap rates are in fact very important, but they're by no means the only thing that we pay attention to when looking at a facility's value.

Cap rates, of course, are the net operating income divided by the purchase price. The percentage that is the result of that equation is essentially the rate of return a new investor would be generating if they were to purchase your facility or a facility, all cash, using no debt.

While that's an important equation, what we actually believe is more important is the equation that precedes it. That equation is the net operating income: revenue minus expenses. That equation is simple on the surface, but beneath the surface...

Introduction To Ask The Broker Videos by Karr-Cunningham Storage


We are here with the Karr-Cunningham Storage team in Marcus & Millichap's Fort Worth, Texas office. Today we will talk about our brand new website. If you visit, moving forward once every week or so, we're going to be updating our site with our new "Ask The Broker" video blog series. The video blog is designed to bring informative content to you so that you're able to keep your finger on the pulse of what's happening out there in the self-storage market.

As we know, our industry is rapidly growing and rapidly changing, and as brokers specializing specifically in the Texas self-storage market, we figured you might have questions about what's happening out there. Perhaps you have certain concerns or perhaps you just want to get some perspective or analysis on a particular issue. If you have an interest in submitting a topic for our "Ask The Broker" video blog, please go to the Contact section of our webpage. Again,, and send us a message.

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