Key Takeaways
- • Prime Group Holdings closed Prime Storage Fund III at its $2.5 billion hard cap on Jan. 26, 2023, exceeding its $1.5 billion target and making it the largest private equity fund ever raised exclusively for self-storage, according to PERE.
- • The commingled fund's investors include sovereign wealth funds, public pensions, university endowments, banks, insurance companies, family offices and foundations, spanning more than 30 countries.
- • Prime has deployed 18 percent of Fund III's capital to date, acquiring 63 storage assets, and has bought $5 billion of self-storage assets totaling more than 22 million sq. ft. across its platform.
- • Self-storage cap rates for properties purchased in early 2023 are 100 to 150 basis points higher than a year earlier, per SkyView Advisors, while Marcus & Millichap reports new-listing cap rates rising to the high 5 percent range.
- • Average street rents for self-storage fell 2.8 percent year over year, according to Yardi Matrix, though they remain above pre-pandemic levels.
Summary
Prime Group Holdings LLC has closed Prime Storage Fund III at its $2.5 billion hard cap, well above its $1.5 billion target, according to a fund closing announced Jan. 26, 2023. PERE describes the offering as the largest private equity fund ever raised exclusively to invest in self-storage properties. The commingled fund's investor base includes sovereign wealth funds, public pension plans, university endowments, banks, insurance companies, family offices and foundations, with more than 30 countries represented, and includes both new and repeat investors from Prime's earlier funds.
The fund is Prime's third self-storage vehicle. Its first fund, launched in 2015, raised $154 million in equity and acquired 67 assets; the second, launched in 2017, raised $706 million and acquired 121 assets. Fund III has deployed 18 percent of its capital and acquired 63 storage assets to date. Across its platform, Prime has purchased $5 billion in self-storage assets totaling more than 22 million sq. ft. Founder, principal and CEO Robert Moser describes self-storage as a recession-resilient, need-based asset offering reliable cash flow with limited downside. Prime's strategy centers on sourcing off-market transactions in undersupplied U.S. markets and applying institutional management through its in-house property management operations. CIO Douglas Kotelly said the firm continues to aggregate and institutionalize ownership across the fragmented North American self-storage market.
The article places the raise within a broader trend of investors from other real estate sectors moving into self-storage. Steven Weinstock of Marcus & Millichap says the buyer pool has expanded since the pandemic, with much of the cross-sector capital coming from multifamily investors as yields there have compressed. Market conditions have tightened, however. Scott Schoettlin of SkyView Advisors says deal flow has slowed amid higher interest rates, and cap rates for early-2023 purchases are 100 to 150 basis points above a year earlier. Marcus & Millichap reports new listings beginning to price in the high 5 percent range and closed deals above 6 percent. Prices have still risen nearly 33 percent since 2019, according to Weinstock.
On leverage, Moser says Prime buys forward-looking interest rate caps to hedge debt risk and typically holds funds for six to eight years, with discretionary extensions to avoid forced sales in a downturn. Prime's first fund sold most of its 67 assets in August 2021 for a reported $750 million, per the Albany Business Review, with a return of 2.8 times invested equity. Yardi Matrix reports average street rents down 2.8 percent year over year, though above pre-pandemic levels; Yardi's Doug Ressler notes operators are focusing on existing-customer rent increases. Weinstock points to continued demand from Millennial and Gen-X renters and declining new construction as development costs rise.
The fund is Prime's third self-storage vehicle. Its first fund, launched in 2015, raised $154 million in equity and acquired 67 assets; the second, launched in 2017, raised $706 million and acquired 121 assets. Fund III has deployed 18 percent of its capital and acquired 63 storage assets to date. Across its platform, Prime has purchased $5 billion in self-storage assets totaling more than 22 million sq. ft. Founder, principal and CEO Robert Moser describes self-storage as a recession-resilient, need-based asset offering reliable cash flow with limited downside. Prime's strategy centers on sourcing off-market transactions in undersupplied U.S. markets and applying institutional management through its in-house property management operations. CIO Douglas Kotelly said the firm continues to aggregate and institutionalize ownership across the fragmented North American self-storage market.
The article places the raise within a broader trend of investors from other real estate sectors moving into self-storage. Steven Weinstock of Marcus & Millichap says the buyer pool has expanded since the pandemic, with much of the cross-sector capital coming from multifamily investors as yields there have compressed. Market conditions have tightened, however. Scott Schoettlin of SkyView Advisors says deal flow has slowed amid higher interest rates, and cap rates for early-2023 purchases are 100 to 150 basis points above a year earlier. Marcus & Millichap reports new listings beginning to price in the high 5 percent range and closed deals above 6 percent. Prices have still risen nearly 33 percent since 2019, according to Weinstock.
On leverage, Moser says Prime buys forward-looking interest rate caps to hedge debt risk and typically holds funds for six to eight years, with discretionary extensions to avoid forced sales in a downturn. Prime's first fund sold most of its 67 assets in August 2021 for a reported $750 million, per the Albany Business Review, with a return of 2.8 times invested equity. Yardi Matrix reports average street rents down 2.8 percent year over year, though above pre-pandemic levels; Yardi's Doug Ressler notes operators are focusing on existing-customer rent increases. Weinstock points to continued demand from Millennial and Gen-X renters and declining new construction as development costs rise.
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