Conversation with Hans Pearson – Chief Executive Officer, StoreLocal

LC: StoreLocal, Australia's fourth largest storage operator, made headlines recently with the $440 million sale of a majority interest to the world's biggest asset manager BlackRock. What lessons did you learn from that significant transaction (which we are proud to have helped guide StoreLocal on)? 

HP: In 2020, we took a strategic view that our industry was evolving to a point where we needed to 'get big or get out'. This led us to a fund-specific global private equity (PE) partnership with Swiss-based Partners Group in 2022. We chose Partners based on cultural alignment more than anything else and that became important to the subsequent success of that partnership. We focused heavily on reporting and governance with Partners to firmly establish ourselves as a reliable counterparty for institutions.

In 2024, as a Board, we adjusted our view to the perceived need to 'get really big or get out' and, given we are still as passionate as ever about self-storage and the StoreLocal business, this necessitated us seeking a larger partner and pursuing an all-in platform transaction via our advisors at Highbury Partnership. Using our key cultural criteria, it quickly became apparent that the BlackRock Real Estate APAC team were an ideal and enthusiastic partner with whom we could further build our business. The credibility we had established with Partners was very helpful in BlackRock gaining confidence in us. Some changes to the head office and consultancy team that we completed in 2023-24 were also key both for credibility and for the horsepower required to get through a major PE due diligence process. So, a lot of lessons there for strategy, getting 'match fit', and having an outstanding team in your corner.

The most critical thing for us has been placing cultural alignment above marginal financial benefits, as these large partnerships take several years and rely heavily on people being authentic in how they undertake business. Along that journey, there is always give and take on both sides and this requires mutual confidence and a firm cultural connection. 

LC: The buy-out by BlackRock means StoreLocal now has over $1 billion in secured capital. What's next for StoreLocal?

HP: We have just stayed busy on what we do day-to-day, which is delivering for customers (in-store customers and capital partners), building out the portfolio, and strengthening our brand along the way. We are very ambitious in where we want to take the platform. We are also very clear on our goals and what we need to do to get there; now we just need to get on with it. Capital depth was a specific outcome we needed to realise our ambitions within the sector, and it means that, while we will always keep our discipline, we can now essentially do anything in the sector. We are already the #4 player and one of only four with a nationwide platform. Now we are a genuine participant in the rapid consolidation/institutionalisation that is currently taking place. This is so exciting for the StoreLocal and BlackRock team.

LC: You founded StoreInvest in 2009 and StoreLocal first opened its doors in 2015. What has been your growth strategy?

HP: Our very clear strategy from the 'get go' was founded on the diversification of income risk that self-storage offers via the hundreds of tenants in each store. Everything we do is through a lens of risk assessment and management. We realised we could achieve further income diversification by opening multiple stores and mitigate risk even further with geographic diversification via a nationwide portfolio. It was also clear to me very early on that this sector was both under-appreciated and under-priced in Australia while being a mainstream sector in the US, so we got busy building out the portfolio as quickly as our capital would allow. Some years in, we realised that owning the whole 'ecosystem' would ultimately be a key value piece, so we set up our own platform brand 'StoreLocal' and committed to the long years of investment to create a strong operational platform over and above the physical property assets. So, in summary, the strategy has been one of investing in scale, technology and operations systems, and brand. We have done some of these better than others at times along the way, but we have held firm to this strategy. This remains our strategy going forward, now supported by the deep and flexible capital that we need at this phase of the sector's evolution.

LC: In an environment where more 'traditional sectors' have struggled to attract interest over the past few years, what is it about the self storage sector that means it has been able to attract capital?

HP: Self-storage has long been sought after by high net worth and institutional capital in the US and other global markets. US self-storage real estate investment trusts (REITs) have been just about the best performing REITs over the past 30 years. It has gained favour with institutions here in Australia over the past 5 - 10 years. This trend is accelerating now based on the realisation that self-storage has a close alignment to the key 'living' investment thematic that is being driven by Australia's outstanding population growth outlook and the densification of living accommodation. These trends are not going away and we see this supporting the sector's growth over the medium and longer term.

LC: What sectors do you see as providing the best opportunities in the investment funds space?

HP: We are a simple business that focuses on self-storage. I think the traditional sectors where assets have no differentiating features or are somewhat commoditised will always struggle to achieve strong returns outside of occasional cyclical highs. So, the basic fundamentals of property selection and income security will likely continue to be foundational elements of any property investment success.