MAGELLAN STORAGE, COMMERCE, CA
In 1998, Magellan acquired an approximately 1 million SF portfolio of industrial properties located at the intersection of Olympic Boulevard and Goodrich Avenue in Commerce, California. This portfolio included an 88,400 SF dock-high concrete tilt-up industrial building at this prime intersection.
In 2004, another local partnership of Magellan which owned Commerce Business Center acquired the property from the outside investors with the intention of converting the property to a self storage facility.
Magellan was confident that the market and site were well suited for Magellan’s award-winning brand. The market study revealed an extremely low amount of self storage per capita and the clear height within the existing industrial building along with the excess land yielded a very strong opportunity to materially enhance the density. The challenge became the entitlements.
In this particular case, the initial reluctance from a specific city staff member was linked to a dated impression that self storage was purely an interim use and not capable of projecting an attractive, retail presence.
Magellan’s credibility from having developed in the City of Commerce for so many years (including The Citadel) combined with the attractive brand Magellan had established and an extensive education process were ultimately sufficient to overcome the objections and obtain approval.
With the entitlement process behind it, Magellan focused on addressing the design and construction challenges the site posed. The clear height within the existing industrial building presented an opportunity to add a second floor, the excess land on the site provided an opportunity to add grade level units, and the vacant land on the corner provided an opportunity to add an attractive, functional retail presence at a very busy intersection. The Magellan Storage development team was ultimately given national recognition by the Self Storage Association (SSA) for its design and construction accomplishment (please see the write up on the award in the press releases section).
Magellan then initiated its proven marketing and operational formula with great initial success as the project rapidly reaching the 60% leasing threshold consistent with its leaseup projections. However, in 2008/2009, the market stalled.
As more fully detailed in the companion case study for Commerce Business Center, the ensuing market downturn and related loan restructuring process put the project on a much longer path to success.
However, the team persisted, completed the leaseup process and favorably presented the asset to the market in 2017, where it received very substantial interest from all of the largest publicly traded and private self storage investors in the industry.
In January 2018, the project was sold to a joint venture between US Storage Centers and Heitman with a very satisfactory outcome for Magellan investors and its lender. The proceeds from the sale were reinvested as part of a 1031 exchange in a 275-unit, Class A multifamily property in Denver, CO.