Talonvest Capital wishes to further strengthen its activity on the east coast and believes it has found the right man to do so.
In April, John Chase, a longtime executive at Tremont Reality Capital of Boston, joined Irvine, Calif., Based Talonvest as senior director of business development, based in the new Annapolis, MD office.
A 14-employee boutique mortgage brokerage firm serving warehouse and business owners across the United States, Capital Talonvest has been on a tear lately, securing roughly $ 1.3 billion in funding for clients over the past 24 months. Most recently, he helped negotiate a $ 116 million financing from ASB Real Estate Investments self-service storage portfolio I stabilized with a three-year variable rate loan provided by Invesco Real Estate.
Chase, who has worked in self-storage finance for decades, recently spoke with Storage Beat about Talonvest’s plans on the East Coast and industry activity in general.
Storage Beat: What is the reason for opening an office on the east coast?
John Chase: Talonvest has a long history of successfully structuring capital solutions for storage and commercial owners across the United States. About 50 percent of the properties funded by the company in recent decades have been in the eastern half of the country. By establishing a full-time physical presence in the East, the firm will serve existing clients more effectively while developing new business opportunities and relationships. It is the objective. To add to that, being born and raised in the Washington, DC area and having spent much of my career operating in the East Coast area, I have a very detailed knowledge of the East Coast.
How does the East Coast self-storage business look like compared to other parts of the country?
I would say the East Coast market trades are really strong. With the product’s strong fundamentals – its return profile, its historic outperformance during down economic cycles – it has translated into a strong level of activity across the country. And we’re seeing strong levels of activity from New England to the Southeast and everywhere in between.
Is there one region on the East Coast that you particularly like when it comes to self-storage – and why?
You will obviously be looking at the urban cores, from DC to Philly to Jersey, to New York and New England. You can almost tell it’s a great MSA. Then there is Charlotte, Atlanta, Tallahassee, Jacksonville, Orlando, Miami. But don’t put some of the secondary markets in between, where there’s still a lot of debt and equity interested in these locations, as long as the deal size is large enough.
How is the development of the company’s self-storage going? It slowed down during the pandemic. Does it recover?
I would say the development of new self-storage buildings or retrofitted for self-storage is very important right now. Talonvest’s construction activity in 2021 rebounded from a lull in 2020. And that is expected to translate into a new all-time high in 2021. Our clients have found attractive development and acquisition opportunities in New York, Massachusetts, Pennsylvania , Florida, Georgia and the Carolinas. .
Are the increase in construction costs hindering the development of self-storage?
I would argue that rising costs certainly impact development returns, but not enough to impact the construction pipeline, at least for now. A recent survey indicated that about 88% of the industry expects material and labor costs to increase over the next 12 months. While the sharp decline in development yields has been mitigated by the compression of cap rates in the storage sector, the big question now is how far can the spread narrow before it hits. causes a slowdown in development.
Where do you see the market in a year from now, assuming we put some of the pandemic behind us?
The self-storage industry has seen growth in occupancy and rental rates over the past year during the pandemic. Based on the rapid growth of the economy that we are witnessing – with the relocation of people, the increase in demand for second homes, the increase in demand for new housing, the increase in the level of use storage and the desire for institutional capital to invest in the sector – we are seeing greater growth for the self-storage industry over the coming year.