IRVINE, CA—An emerging trend in the financing market for self-storage is the increasing number of developments and redevelopments taking place, Talonvest Capital Inc. principal Tom Sherlock tells GlobeSt.com. Following a record year for the boutique mortgage-brokerage firm, which closed in 2015 more than $474 million of financings including perm loans, bridge loans and JV equity for self-storage, office, industrial and apartment properties across the country, we spoke exclusively with Sherlock about the self-storage sector and what he expects to see from it this year. 

GlobeSt.com: What emerging trends are you noticing for 2016 in the self-storage sector?

Sherlock: The emerging trend in the financing market for self-storage is the increasing number of developments and redevelopments taking place. Since the second half of last year, especially in the fourth quarter through January 2016, Talonvest has been working on a rapidly growing number of ground-up construction loans, including certificate of occupancy deals, and redevelopment bridge loans. While there is a growing supply of lenders providing this type of capital to meet the growing demand, the underwriting discipline appears to be remaining strong. That dynamic is good for the longer-term health of the storage industry.

GlobeSt.com: How is your approach to the sector changing this year, if at all?

Sherlock: Our approach has always been providing capital expertise, honed through decades of storage-financing experience, with the personal attention inherent in a boutique firm. We believe it's a better way to deliver capital to our clients. While that foundation remains unchanged, we are working to educate the industry even more about the options available to the storage owners through insurance companies, banks, CMBS lenders, credit unions, debt funds and family offices. Whether it is debt or equity, the capital markets are not homogenous today, and too many owners are leaving too much money on the table when they don't realize that dynamic.

GlobeSt.com: What attracts your firm to a particular self-storage asset?

Sherlock: Capitalizing a storage asset, whether its debt or equity, starts with knowledgeable sponsorship. We look there first, and if that's attractive, then we analyze historic cash flows, local market competition and projected operations.

GlobeSt.com: What else should our readers know about this sector?

Sherlock: The industry has matured a great deal over the past decade. This is an operationally intensive business, far more complicated than many assume, and is more analogous to hotels than any other form of commercial real estate. While it is a great investment opportunity, it's better suited for the long-term holder with patient capital who can maximize operations rather than the short-term IRR driven owner/investor.