Starwood Real Estate Income Trust Inc., a non-listed REIT managed by a subsidiary of Starwood Capital Group, has entered the self-storage sector with the formation of a joint venture with Morningstar Properties LLC, a leading owner and operator of self-storage facilities under the Morningstar Storage brand.
The joint venture includes the recapitalization of 25 assets totaling 1.8 million square feet owned by Morningstar and managed funds as well as a commitment of capital to continue acquiring self-storage assets under the Morningside brand. The JV partners did not release specifics on the level of funding but Starwood noted the venture will target stabilized, cash-flowing assets and will seek out self-storage acquisitions on both a one-off and portfolio basis.
The seed portfolio for the newly formed venture includes assets located throughout the Sun Belt region, which is experiencing significant population, employment and income growth. Starwood also noted the self-storage sector has been resilient throughout the COVID-19 pandemic and continues to exhibit attractive fundamentals.
Morningstar Storage has developed, acquired and operated more than 250 self-storage projects across the United States. The company primarily focuses on self-storage and marinas in the South and Mid-Atlantic U.S. Morningstar Storage’s website lists locations in Alabama, Arkansas, Florida, Georgia, Kentucky, Maryland, Oklahoma, North Carolina, South Carolina, Tennessee, Texas and Virginia. Texas, with more than 20 properties, and North Carolina and South Carolina, with 13 and 12 properties respectively, have the most Morningstar Storage locations.
Ethan Bing, Starwood Capital managing director, said in a prepared statement the global private investment firm, looks forward to partnering with Morningstar and adding self-storage to SREIT’s portfolio of assets. Bing said the sector’s stable cash flows fit well with SREIT’s yield and long-term hold objectives. Calling Morningstar a best-in-class branded operator, Bing said the partnership provides SREIT with immediate scale in a fragmented sector and creates a platform for substantial growth.
For Morningstar Storage, the joint venture with a prominent firm is a testament to the company’s success in the sector, David Benson, Morningstar CEO, noted in prepared remarks. He said the combination of Morningstar’s brand and acquisitions and operations expertise with Starwood’s investment capabilities and financial backing creates a powerful partnership that is expected to grow.
Morningstar was advised by Eastdil Secured on the recapitalization of the seed portfolio and joint venture formation.
SREIT’s Growing Portfolio
As of Nov. 30, the SREIT portfolio has a total asset value of $18.2 billion across 334 properties. The NAV REIT invests directly in high-quality, stabilized, income-producing real estate. It is managed by Starwood REIT Advisors LLC, a subsidiary of Starwood Capital Group.
In November, SREIT acquired a 62-asset multifamily portfolio with a total of 15,460 units across 10 states from Strata Equity Group. Starwood declined to share the price of the transaction and the locations of the properties only noting that the portfolio was located in 27 markets primarily in the Southeast including the states of Georgia, Tennessee and North Carolina. Stata continued in an asset management role for the portfolio.
That acquisition came a year after two sizable transactions by SREIT. In November 2020, the REIT acquired two multifamily portfolios for a combined $644.8 million as part of its affordable housing platform. The portfolios were comprised of 32 communities with a total of 4,618 units and were located in Virginia, North Carolina and Florida.