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Financing self-storage facility set-up

As with any (new) venture, you need to be able to finance it.


Starting out
Usually in self-storage you see these financing scenarios:

  • You or your company/partnership has equity for the set-up of a self-storage facility or to buy an existing self-storage facility.

  • You or your company/partnership own land or a building that can be leveraged against a bank loan (or obtain a bank loan through other means) to build on or convert to self-storage.

  • You are backed by other individuals, single or multiple fund-based entities, a partnership of funds (or yet another backing solution) to set-up or buy an existing self-storage business.

Building suitable for self-storage conversionFreiraum 24, Germany, completed self-storage conversion

 

 

 

 

 

 

Continued growth
When your self-storage business grows and you want to expand, you have other options to raise capital. Many larger self-storage businesses started with a single site and, as it grew, they gained considerable wealth by using one of these popular financing options:

  • As a recognised self-storage operator, you could use debt financing to support expansion. Secured mortgages are available as with any real estate acquisition. Some banks also fund the capital investment of the construction or fit-out.

  • Involve other private shareholders – this is easier once you have one or two sites in operation. Many private equity funds and other large investors see self-storage as an attractive addition to their portfolios. A profitable self-storage operator is in a good position to attract capital.

  • IPO (initial public offering) or stock market launch – sell shares in your company to the general public to raise expansion capital.

  • Convert your business into a Real Estate Investment Trust (REIT) as a sponsor and/or sell/lease-back your underlying asset to a REIT to generate growth capital. A REIT is a company that manages a portfolio of real estate to earn profits for shareholders. REITs can be publicly or privately held and public REITs may be listed on public stock exchanges. REITs can be very tax efficient, as the property company pays no corporation or capital gains on profits made from property investment. Each country has its own criteria for REIT conversion, for example, a certain percentage of revenue must be derived from rents and/or a certain percentage must be paid out to shareholders.



Need help?

If financing is a concern, we’d be happy to discuss your options with you. We may even be able to connect you with interested investors. Contact us for more information.


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