The ICM Bluebird Canadian Self Storage Fund has purchased a self-storage facility on Victoria Street in Whitby, Ont. and another at The Shops at Buffalo Run in Calgary for more than $60 million.
The closed-ended fund is a venture between ICM Asset Management and Meckelborg Financial Group Ltd.
The two latest outright acquisitions are the fund’s ninth and 10th since inception in early 2023 and bring its gross asset value to more than $185 million.
“The fund is being used to consolidate our assets so we have the same management in control of the properties,” Bluebird Self Storage chief executive officer Jason Koonin told RENX.
The fund’s investment strategy involves:
- acquiring new, but not yet stabilized, class-A facilities and leasing vacant storage units;
- purchasing land, developing new class-A sites and leasing them to stabilization;
- and acquiring, renovating and repositioning non-professionally managed class-B assets through the application of Bluebird’s professional management platform.
Whitby and Calgary acquisitions, activity
Bluebird had already been managing the modern, three-storey Whitby facility for three years. The 2.52-acre site with a 135,547-square-foot building includes 99,965 square feet of rentable space and almost 900 lockers. It’s more than 65 per cent occupied.
The fund purchased the property from the original investors that developed it, according to Koonin.
“We know the market, we’ve seen the demand and we’ve seen prices in the market increase, so rates in the market are pretty solid and getting better,” Koonin noted. “Despite increased competition, it’s a growing area and a great asset that’s highly visible.”
The Buffalo Run location was developed by Bluebird before being transferred to the fund, and Koonin described it as a “next-generation” facility.
It offers more than 83,000 square feet of net rentable space with 800 lockers. It was launched in July 2023 and achieved more than 60 per cent occupancy by the end of last month, setting a record lease-up rate within Bluebird’s portfolio.
“We underwrite properties to lease up to 90 per cent occupancy in four years,” Koonin explained. “This site is at 62 per cent occupancy after 11 months.”
Bluebird opened a similar Calgary facility at 125 Mahogany St. in February and it’s 27 per cent occupied.
Alberta has become the biggest market
Bluebird is managing 25 properties that combine for about two million square feet and it has another 18 in its pipeline that will encompass another approximately two million square feet.
Many of those properties, and others, are candidates to be acquired by the ICM Bluebird Canadian Self Storage Fund.
Koonin said private equity funds, a pension fund and asset management companies have invested in the fund. More capital is now rolling in after a pause last year while interest rates were rising and deployment strategies were being reviewed.
“We’ve seen a greater appetite from investors for development properties because of the higher returns than for buying existing assets and doing a management turnaround on them to optimize the performance,” Koonin said.
Thirteen of the operational facilities are in Alberta and five are in Ontario. There are two each in British Columbia, Quebec and Nova Scotia and one in New Brunswick.
“Some investors exited eight properties last summer in the GTA (Greater Toronto Area) and they were able to realize significant gains on their investment,” Koonin noted. “But it certainly changed our geographic mix from being primarily GTA to now primarily Alberta, but we’re going to rebuild in Ontario.”
Mississauga and Quebec investments
The ICM Bluebird Canadian Self Storage Fund was used last year to acquire a facility at 135 Matheson Blvd. E. in Mississauga.
“That market has been a bit more difficult than we anticipated,” Koonin said. “There’s probably a bit of a shortage of storage in that market, but inflation has really affected the community there more than other communities.
“People are more economically sensitive to the cost of housing and food, so we’re seeing customers sometimes not being able to afford their storage or they’re not staying as long as they were at the start of the pandemic.”
Bluebird is developing what will be its flagship Montreal location, a five-storey facility on Boulevard Métropolitain, that it’s hoping to complete by the end of this year.
“This is going to be something much more modern and more akin to something that looks like a class-A office building versus an old industrial building where they haven’t really made too many improvements other than installing the lockers,” Koonin said.
Bluebird is learning more about the Montreal and Quebec City storage markets after initially facing challenges with hiring and retaining staff and understanding local consumer preferences.
Koonin said putting quality people in place, introducing a French-language website and offering a higher level of service than many of its competitors has started to pay off with strong demand.
Bluebird is also developing a class-A facility in the Montreal suburb of Laval and two in downtown Quebec City that are expected to be completed next year.
Optimism for the future
Koonin is confident Bluebird will have a strong second half of 2024 that will carry on into 2025 across Canada. He’s seeing strong self-storage demand, stable occupancy and collected rents that are up eight per cent over last year.
“Some competitors are much more focused on cutting costs, which a lot of times means staff, which, of course, degrades service,” Koonin said. “We are doubling down on service and not really competing on price.”
Bluebird launched a sister company called Sunbird Storage in North Carolina last year. It’s about to open its second location and has eight more in development.
Koonin believes the “recipe for success” the company has used in Canada will also bring positive results south of the border.