Company: MJ Partners Real Estate Services Inc.
Time in current role: Fourteen years
Biggest accomplishment: Persuading large institutional investors to consider self-storage a legitimate real estate class
Short-term goal: To stay ahead of competingand consultants who are beginning to crop up in self-storage
A decade ago the self-storage industry was a business that lawyers or accountants invested in after hours as a sideline. But today institutional investors are eagerly pouring equity into developing and acquiring self-storage assets. Much of this change has been engineered by Marc Boorstein, principal of Chicago-based brokerage MJ Partners Real Estate Services Inc.
When Boorstein began representing self-storage sellers in the 1980s, developers mainly considered local zoning rules and competition within three miles. No one thought about building and selling portfolios of properties. Boorstein demonstrated to skeptical investors that portfolios could be combined and sold to achieve superior returns.
Today there are four publicly traded self-storage REITs, and offshore capital is pouring into the sector, valued by analysts to be roughly $120 billion. Boorstein's firm is now scrambling forfrom Los Angeles to Boston, and has become expert at finding capital for developers.
The firm receives 52% of its brokerage volume in self-storage and the remainder from other sectors, primarily office. With a staff of 10, last year MJ Partners brokered $180 million in self-storage transactions, up 10% from 2005.
Boorstein was exposed to self-storage early on. His father, a Chicago attorney, owned two self-storage facilities as well as a shopping center. After graduating from the London School of Economics with a finance degree in 1984, Boorstein went to work for Chicago auction specialist Sheldon Good. There he noticed that the self-storage assets often attracted little notice. “Self-storage was barely a blip in commercial real estate back then,” he recalls. Intent on changing that, by 1993 he was ready to strike out on his own, and co-founded MJ Partners.
Why storage? Boorstein is drawn to the economics. The 10 biggest self-storage companies own less than 20% of the industry's assets, meaning that the mom-and-pop owners still have lots of property left to sell. Facilities break even financially somewhere around 60% to 70% of capacity, which most achieve shortly after opening. Real profits begin at 85% of capacity, and the national average is close to 88%.
In the 1990s, Boorstein arranged transactions where the buyers could count on an annual return of 10%. Today the deals are made at returns close to 6%, and few in the industry believe prices can go much higher. Nevertheless, there is still room for plenty of new construction, with surveys showing that many metro markets are still underserved as American consumers collect more material items than they have room for in their own homes.
Boorstein has scrambled to stay on top of the rapidly changing industry. New facilities have gotten 50% larger than a few years ago, and are now often built as brick and glass construction located in high-profile retail strips, rather than the traditional eyesore industrial sites. Boorstein has more competition, too, as brokerages like CB Richard Ellis establish self-storage groups.
Meanwhile competition for the best assets threatens to become overheated. In one of his most celebrated deals yet, Boorstein last October sold a seven-facility portfolio owned by Life Storage Centers LLC of Elgin, Ill. for $52 million to an Orlando, Fla. partnership backed by investors from the U.K. The acquisition was highly unusual in that two of the facilities had not been built yet, and were only zoned for construction.
“A number of people warned us that we were coming to the market too early to sell,” says Christopher Barry, owner of Life Storage. “But Marc Boorstein saw things that our feasibility people and appraisers didn't see. He delivered a deal for us that nobody thought was possible. In the self-storage industry, he's a trailblazer.”