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What is a Self-Storage Syndication?

A self storage syndication is a way to purchase larger, or more costly self-storage facilities in class A/B markets by pooling together the capital (money) and experience necessary to obtain financing. This is a group of investors that come together to pool money, skills and experience to make ‘the deal’ work.  A self storage syndication is a Legal partnership between general and limited partners who together purchase a self storage facility, most commonly formed under SEC Rule 506 (c), The general partners find, vet, and structure the deal, they form the syndication, and manage the project from inception to completion.  They often then will operate the facility, or , subcontract out its management to a Self Storage Operator.  the Limited partners bring capital to invest passively in the project, and enjoy dividends paid out annually, or upon sale.

General Partners and Limited Partners in a Self-Storage Syndication

In very simple terms, it structured in the following way:

  • General Partners (GP’s): contribute experience, time, contacts and sometimes money
  • Limited Partners (GP’s): contribute money, monitor the progression of the deal, learn about all the steps it takes to become a GP
There can be any number of General and Limited Partners in a syndication, there are no set rules that govern this.  Typically however, there are 1-3 General Partners (GP’s) and anywhere from several, or dozens of  Limited partners (LPs).

What is the Role of a General Partner In a Self Storage Syndication?

General Partners do the extensive research, cold calling, marketing necessary to FIND the deal.  Then, they put together initial capital to start the deal, like paying for demand studies, ATLA surveys, Phase 1 and 2 environmental surveys, putting down Earnest money, that is all necessary to put the deal together. On the other hand, Limited Partners bring the money to fund the remaining cash needed to close the deal. Limited partners don’t have operating control, while general partners do.  As an investor, your goal will be to find a trustworthy general partner who presents a solid investment opportunity.

What Is The Role Of A Limited Partner In A Self Storage Syndication?

Limited partners typically consist of passive investors who are accredited investors, who bring capital (money) to fund the downpayment, or , the part of the project that’s not covered by a lender or bank financing.  Additionally, limited partners have the benefit of being able to profit greately from the deal, but also have limited liability in the deal.  This means that if the deal doesnt work out for whatever reason, the LP’s do not have their personal assets (eg…their own personal homes) on the line as collateral.  This is different from a general partner, who is liable for the entire project.  Usually for a ground-up development, the land that the facility sits on provides a large piece of equity for the deal, so the risk to even the general partners can be mitigated when the land is used as collateral.
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