The Benefits of the Fund Model

Since we founded Spartan Investment Group in 2015, our team has raised over $200 million in private equity and scaled to over $500 million in assets under management.

Over that time, we have honed our formula, seeking out competitive deals that position our investors to capitalize on the increasing demand for storage.

Today, we have 58 facilities under management and a network of over 8,500 accredited investors. Most importantly, we have an ambitious vision to expand our reach even further. To do so, we must find new ways to augment our model and seize opportunities in the market. That’s why, in 2022, we launched Spartan Storage Fund 1.

Beyond Single Syndications

While one-off syndications help investors to get their foot in the door of the storage market, funds offer flexibility that single deals cannot. With a fund, operators can look for multiple properties simultaneously and quickly deploy capital when they pinpoint a match. In the current economic climate, speed and agility are paramount. A fund enables both.

In the case of Spartan Storage Fund 1, the Fund provided us with a pool of liquid capital to purchase assets. Our team could then negotiate to place advantageous debt on the properties we acquired at a future date. For example, in July 2022, Spartan was able to buy FreeUp Storage Havelock — a 27-building facility encompassing nearly 200,000 square feet of prime self storage — in all cash.

A Three-Pronged Approach

Despite these positive factors, Spartan Storage Fund 1 still limited the work we could do on behalf of our investors. Because the Fund was focused on cash-flowing, value-add facilities, we had to walk away from hundreds of promising deals — like deep value-add properties — that didn’t adhere to an income fund profile.

For some investors, the properties we purchased — and the regular cash flow we generated — were the right fit. However, we knew others in our network were looking for a different model.

As a result, Spartan decided to launch three new funds in 2023: the Spartan Storage Income, Growth and Debt Funds. Each targets a different investment profile, allowing our team to align the right property with the right investor.

Projects that could yield a strong return but will take time and investment to produce revenue will go into the Spartan Storage Growth Fund. Investors participating in this offering will benefit from a substantial back-end return rather than the consistent income that less ambitious deals would supply.

Properties that will generate cash flow quickly — like those in Spartan Storage Fund 1 — will go into the Spartan Storage Income Fund. This Fund is ideal for investors primarily looking to earn monthly income while enjoying modest upside potential.

Lastly, the Spartan Storage Debt Fund targets individuals looking to invest in debt rather than equity.

A Long-term Hedge

With interest rates continuing to rise, many investors are looking for effective ways to protect against the impact of inflation. Private debt is one such avenue. When an individual invests in private debt, they lend money to a company. In exchange, they receive a fixed return on investment in the form of interest payments.

The capital raised via the Debt Fund will be lent to the Income and Growth Funds for construction and improvements. This opens an alternative avenue to bank financing, boosting Spartan’s ability to be nimble in our acquisitions. And for investors, it delivers cash flow at a more conservative risk level than an equity investment.

Investors in the Debt Fund don’t participate in the upside of a deal. Instead, they receive predictable monthly payments at an 8 or 9% interest rate in a lower-risk environment. Since the debt is backed by self storage, investors have the ultimate peace of mind that their assets are protected.

They also have flexibility. Debt investors can choose to redeem their investment at the 90-day mark. Alternatively, they can lock in a higher interest rate by keeping their capital in the Fund for up to five years — a particularly valuable option when the yield curve is inverted, as it is now.

A Diversity of Options

In the current economy, it can be difficult to secure attractive rate terms. Operating with the fund model allows our team to buy more assets, close on those assets in cash and then place the best possible debt at the optimal time.

The three-fund model builds on this potential, creating space for us to pursue a broader range of deals and sort them into their correct funds. Because there is better collateral and liquidity within a fund, banks consider them to be more lendable than single syndications. This means we can often secure more favorable terms when placing debt on the properties.

As our community has grown, so has the variety of risk profiles and priorities represented among our investors. We designed the Spartan Storage Funds to cater to this.

Through these offerings, we provide three unique ways for investors to meet their financial goals faster. In doing so, we are also enhancing our toolkit so we can take advantage of more great deals despite a challenging market.

Want to learn how the Spartan Storage Funds can help you build wealth? Schedule a call with a member of our Investor Relations team!

Spartan does not give tax, legal or investment advice. Please seek outside counsel from your CPA or attorney before making any tax, legal or investment decisions.