April 19, 2010 12:15 PM
Investors interested in self storage should keep a watchful eye on the Goldman Sachs crisis, for two reasons. First of all, self storage businesses historically have been included in some real estate deals structured by Goldman Sachs and other investment bankers who are starting to be accused to mortgage fraud. As long ago as 2001, Bruce Taub, the then senior vice president of acquisitions for Storage USA commented that some equity deals structured by large firms such as Goldman Sachs and Prudential Real Estate were looking unrealistic: "A number of joint ventures purchased or developed assets in the last few years with an exit strategy that proved unrealistic," he noted in Commercial Investment Real Estate, in words that now seem prescient.
Secondly, at the end of 2009, almost seven percent of Goldman Sach's Real Estate Securities Fund was dedicated to self storage investments. If Goldman Sachs and other major investment bankers lose a lot of money or go out of business, capital for self storage acquisitions and development may have to come from other sources. Developments in one aspect of the market are likely to affect other aspects of the market. [More]