This article originally appeared in The Orange County Business Journal
November 15, 2024
Buchanan Street Partners is upping its investment in self-storage facilities.
Buchanan Street Partners bought a 2.05-acre property in Upland for $6.25 million and revealed plans to tear down the medical office building at 1382 E. Foothill Blvd. and build a 4-floor, 123,000-square-foot self-storage site.
“The Upland transaction follows our thematic approach to investing in well located self-storage properties in highly sought after Western U.S. markets with favorable supply and demand metrics,” Buchanan Street Partners Vice President Ferooz Yacoobi said in a statement.
“There is an extremely limited amount of new climate controlled self-storage supply currently available within this trade area. This new class A facility will fill a void within the marketplace. The redevelopment of this property will be a major improvement over the dilapidated building now onsite and will help to enhance this area of the city.”
The deal marks Buchanan Street’s fifth investment in the self-storage space. The company has almost 7,000 units after having made purchases in Auburn and Santa Clarita in the past year. It plans to build a $500-million-plus portfolio of “institutional quality self-storage assets throughout the Western U.S.”
Co-founder and Chairman Robert Brunswick earlier this year told the Business Journal that self-storage facilities are more cost efficient than multifamily or industrial rents on a per square foot basis as consumers are learning to utilize storage as a replacement for an extra bedroom, attic or garage.
“Investors in general view self-storage much like multifamily as it provides for spread of risk with its diversified tenant base and a great hedge against inflation with the nature of its short-term leases,” said Brunswick, a 2023 winner of Business Journal Innovator of the Year Award.
Timothy Ballard, the co-founder, president and CEO of Buchanan Street Partners, said the company has already invested $225 million into its self-storage portfolio, with the goal of reaching $500 million within the next three to five years. The Buchanan Street Partners self-storage portfolio is now up to 6,800 units, with pending purchase of another 900 units in the pipeline.
The Newport Beach-based company is looking to invest in self-storage facilities valued at $10 million to $50 million located across the western U.S.
Buchanan Street Partners also offers direct lending services for construction and self-storage bridge financing.
During the firm’s 25 years, it’s invested more than $8 billion in real estate debt and equity investments.
Self-Storage Kicks on Route 66
The Upland self-storage site, located on the historic Route 66, will feature 1,180 units and along a thoroughfare with numerous retail and business locations.
Buchanan Street Partners bought the medical office building from a private owner and developer in an off-market deal.
Buchanan Street Partners plans to start construction on the self-storage site as soon as possible and complete the redevelopment by January 2026.
DAI General Contracting, which specializes in self-storage construction, is the general contractor. Construction financing is provided by Wintrust Bank.
“In addition to the Upland project, our team is working on several other California self-storage sites that are currently in the predevelopment design and entitlement phases,” Yacoobi said in the statement.
The building at 1382 E. Foothill Blvd., known as Inland Medical Plaza, was built in 1988. The 6,235-square-foot building featured several individual physicians renting space for their respective medical practices, per CoStar data. Also leasing space at Inland Medical Plaza were healthcare service providers like Nuclear Cardiology, Pacemaker Clinic and Heritage Healthcare.
Buchanan Street Partners, beyond Inland Medical Plaza, also invested in self-storage sites in Auburn, California, Chino Hills, California and Mesa, Arizona.
Catching the Office Conversion Bug
Landlords across the county have caught the office conversion bug in record numbers, according to a recent CBRE report. The real estate advisory firm found 73 office properties were converted into another use so far this year, with another 30 conversions to be completed by the end of 2024.
It was the highest number of office conversions since CBRE began tracking such projects in 2016.
Landlords, according to CBRE’s November 2024 report, have been incentivized to convert office buildings to residential or other uses due to “historically high office vacancy and falling asset values.”
“The pipeline of office conversions is expected to grow as cities offer more incentives and sellers of trouble assets further discount prices, particularly for older buildings,” the report continued.
About three in four office buildings undergoing or set aside for conversion are converted into a multifamily development, compared to 8% hotel, 6% life sciences, 4% industrial and 9% classified as “other,” per CBRE.