The self-proclaimed “Storage King of America” aims to become the self-storage lending sovereign throughout the state.
Brian Cohen‘s Andover propertiesThe company, which owns a $2.8 billion portfolio of self-storage sites, residential communities, RV parks and car washes, announced this week that his company is launching. Andover Storage Lendingan origination vehicle specializing in non-recourse bridge and construction financing in the self-storage field.
Cohen told CO that his origination division is funded by institutional investors and is capitalized at $300 million. The company has already agreed to loans totaling $100 million in six deals in recent weeks, including his first loan. Madison Capital | Let’s save it Refinancing a Class A self-storage facility in Richmond, Virginia.
“We know what it’s like to be a borrower. We know it’s heart-wrenching, especially the red tape you have to go through with some local and local banks,” Cohen said. he said. “We know how to remove that friction. We consider ourselves easy to work with, so we don’t want to complicate this.”
with investment partners angelo gordon, fir tree partner and Black Stone (BX)Since 2018, Cohen has executed over 80 property purchases in the self-storage and alternative asset classes. Andover Properties’ portfolio currently boasts more than 13.5 million square feet of leasable area in 162 properties in 18 states.
“One of the benefits of being in the self-storage industry is that, like a hotel, you generally know all the owners,” Cohen says. “I have good relationships with all of our competitors and work with mortgage brokers who specialize in our area both in our own borrowings and in this lending capacity.”
Cohen said Andover Storage Lending’s sweet spot is in the $5 million to $25 million range for retail loans, but the company is willing to lend up to $150 million or even $200 million in a single loan, despite the belief that many bond funds already dominate that space.
Cohen said Andover Storage Lending plans to offer up to 90% loan-to-value (LTV), primarily on the bridge side, with about 65% stabilized LTV. The company estimates it will offer 375 basis points above SOFR for bridge financing and 50 basis points above SOFR for construction financing (425 basis points above SOFR).
“You can get a bank loan for over 250, so there’s a reason why people want to take out a bank loan,” Cohen acknowledged. “But I know as a borrower, I don’t like signing recourse loans. You never know what the world is going to do. And in 2009, 2010, 2011, a lot of people recourse I’ve seen people having to pay for it with loans.” [post-GFC]”
A recourse loan allows the lender to seize additional assets if the borrower’s debt exceeds the value of the property. Nonrecourse loans protect the borrower by limiting the lender’s clawbacks to the collateral specified in the loan agreement, even if that collateral is worth less than the outstanding debt.
In addition to primarily offering full or partial recourse loans, many commercial and local banks now require borrowers to deposit 10 percent to 20 percent of the loan balance with the bank and maintain the account for the duration of the loan. I’m asking you to. Cohen said.
Cohen also highlighted the following failures: First Republic Bank and silicon valley bank In the spring of 2023, he published his conclusion that funds for CRE investments were flooding out of the traditional banking system and into private sources. To this end, his team has begun preparations to create a financing vehicle in late 2023 to capitalize on the demand for new debt financing in the self-storage market.
“We thought all the regional and local banks were just going to be constrained by the cash on their balance sheets, but there’s still talk of further regulation to get these banks to hold even more deposits,” Cohen explained. “As that happened, we thought we could fill that capital void and make a return similar to the equity side.”
With home prices hitting a 40-year high and fewer Americans than ever before buying homes or moving into new builds, the self-storage business that boomed during the pandemic is coming back down to earth. Cohen told CO that the lack of residential mobility has trapped self-storage in a low-demand environment, and that low demand is now working against operators and the projects they’re trying to lease.
“We think there is still a lot of value that renters can create. But right now, with low rents and low demand, 90% LTV remains realistic at this point,” he said. . “But we expect significant growth in the future.”
It’s unclear how long Andover Properties will remain active in the lending space, but the “storage king” is poised to preside over the new capital markets kingdom for at least three years.
“The next three years will be a great path to delivering low to mid-teens returns for investors just by lending money to very good borrowers in this space that we understand very well,” he said. I think it should,” he said. “I don’t think we’ll be in the lending business forever, but we do have a cap on capital and we think we can fill the void.”
Brian Puskas can be contacted at bpascus@commercialobserver.com
