Capital Growth Buchalter (CGB), a national development and construction firm, recently launched a new self-storage company focused on buying and building facilities throughout the United States.
CGB tapped Mike Vahle, a former real estate development executive at Public Storage, to lead the new division as managing partner, along with Eric Buchalter—a third generation member of the family firm. The duo formed a working relationship when CGB previously sourced some development opportunities for Public Storage in North Carolina.
Birmingham-based CGB was founded in 1953 and has completed more than 1,500 real estate projects valued at $2.5 billion in 30 states. The firm completes an average of 90 projects annually.
The new storage division will run under the name StoreGuard, which recently notched its first facility with the acquisition of a 358-unit facility in Hinesville, GA.
The Storage Beat recently connected with Mike Vahle to find out more about the company’s plans going forward.
What’s the play going forward? Are you focusing on acquisitions or development mostly?
“I would say we are opportunity-focused and actively pursuing both of those avenues. My background is strongest in new development, and I have significant experience with redevelopment work, especially with storage.”
“The StoreGuard team has good experience with design and construction, so we are seeing with a trained eye where we can add value. Our acquisition at Hinesville is an example of that. We saw an opportunity to expand the existing facility, do some significant repairs and upgrades to the facility and make it more secure, more pleasant and comfortable for the customers, and bring in a professional management firm.
“With all aspects of that deal we are trying to max the NOI that would come out of the property We are not afraid to roll up our sleeves to do the tougher work a lot of investors don’t want to do, or are not capable of doing.”
What advantages does the CGB platform have?
“The biggest piece of the CGB platform is in retail development. They deliver about 80 new projects per year. That skill and ability gives us a degree of flexibility to use land in ways that other people may not be able to. If we have retail projects with extra land we can do storage, and vice versa.”
What does your pipeline look like currently?
“We have a really robust pipeline of new development projects, as well as value-add acquisitions. We are focusing in the Southeast and Sunbelt, but open to good opportunities anywhere in the country. Looking ahead, we have a couple of new projects we anticipate breaking ground on later this year.”
What is your operational plan?
“We’re using third-party management. In major metros we expect to use REITS or really good regional operators in the smaller markets. We do have the opportunity to brand some smaller market properties as StoreGuard Self Storage and going through rebranding now in Hinesville.”
Are unmanned or remotely managed facilities a part of your plan?
“It really depends. Every facility and every trade area has its own dynamics that would lead us to what operational model works best. An onsite property manager provides a lot of value to large a new property going through lease up and stabilization.”
“The remotely managed model actually brings a lot of benefits too. Extended hours of availability over the phone is helpful for customers who visit the facility outside of normal office, and this a nice complement to the online system. Our Hinesville facility is remotely managed and we ensure that a property manager is available from time to time to help customers and monitor the property. Remote managed facilities are becoming more and more successful as time goes on.”
Your formation announcement emphasized sustainability and environmental stewardship. Why was that important to you to make a part of the business?
“It goes back to those core values I was talking about earlier. We really truly aim to make a positive impact on every community in which we work and actively look for ways to use sustainable design and operational practices, It makes good business sense, and its the right thing to do.”
What methods do you find most impactful for achieving sustainability in self-storage?
“In the storage world, where we see the biggest impact is using modern building controls, high efficiency HVAC, and LED lights. All of those all help with conservation. In addition, a lot of the building components are pre-engineered and prefabricated, which reduces waste during construction. We’re also exploring the use of solar panels at all our facilities. Each state and jurisdiction has different requirements, and different ways of doing business. In our mind solar panels are a really good next step for self storage when it comes to energy conversation.”
What headwinds do you expect to encounter heading into 2023?
“Increased interest rates and construction costs have been challenging for our acquisitions and development efforts, as it has for everyone in the industry.”
There tends to be a disconnect between seller’s expectation which lag the market, and buyer’s exceptions that are forward looking. We are seeing this discrepancy on land deals and acquisitions. There is also inherently more risk in the development work than in acquisitions with the added cost to carry projects to get through lease up. As a result, we expect to see some development deals get paused or called off broadly across the industry.”
“With our long-term perspective, strong balance sheet, strong banking relationships, and creative deal making, we are finding ways to move forward on a full pipeline of projects right now.”