Turik’s HAN Capital pulls in $32M on Chicago self-storage boom

Brothers Alex and Nik Turik started their Chicago real estate investment firm HAN Capital to enter the self-storage property market in 2009 when it was a niche segment of the industry.

Now, they’re cashing out for thick profits on an Old Town property in the city and another in the northern suburb of Wilmette in deals with large companies that institutionalized the sector over the past several years.

Combined, the sales fetched $32 million for HAN, which spent a total of about $17 million to buy them between 2015 and 2017, Alex Turik said. The buyer of both properties was a joint venture of Westport Properties U.S. Storage Centers, which are both based in Irvine, California.

“We buy non-institutional property, work with it, turn it around and make it pretty and sell to the institutional guys,” Turik said. “The last three years, especially during the pandemic, the demand skyrocketed.”

The Old Town self-storage facility at 1516 North Orleans Street in Chicago was the pricier of the two sold, for about $20 million, according to Turik. The Wilmette property at 3150 Wilmette Avenue sold for about $12 million. The buyers didn’t return a request for comment.

While the health crisis and its impacts boosted the “four D’s” that drive the self-storage market — death, divorce, displacement and downsizing — it’s now inflation that’s extending the runway for its growth in demand. The more flexible lease terms typical of the self-storage business, that allow for monthly adjustments to rental rates, make the properties a strong hedge against inflation.

“As opposed to industrial, we’re not in multi-year leases for rents with one or two tenants. We have hundreds or sometimes thousands of tenants, as month-to-month renters,” Turik said.

When he got started in the self-storage market about 15 years ago, Turik was buying such real estate at a 9 percent cap rate, a measure of a property’s rental income after expenses divided its purchase price. Since then, they’ve compressed to about 4 percent, a reflection of the sector’s rising values and decreasing risk as demand swelled.

“In two or three years, we’ve experienced demand that normally takes five or 10,” Turik said.

The Chicago area also ranks among the top ten markets for its pipeline of new planned storage developments. It’s set to receive 2.6 million square feet in the coming years, according to a report from earlier this year. The area has the largest share of storage space planned in urban markets among the sector’s top cities, with 91 percent of the developing space eschewing the suburbs.

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