REIT Filling Gap in Lending for Self-Storage Development

John Good, president and COO of Jernigan Capital (NYSE: JCAP), joined REIT.com for a video interview at REITWorld 2015: NAREIT’s Annual Convention for All Things REIT at the Wynn Las Vegas.

Jernigan Capital is a newly formed REIT that lends directly to self-storage owners and developers. Good explained that the company is filing a void left by the banks in the wake of the financial crisis. Due to increased regulation, banks are finding it harder to make loans on development properties, he said.

Self-storage developments have no cash flow or tenants on day one, so they are effectively shut out of the market, Good said: “We are seeing an amazing volume of deals coming our way.”

Good also said he expects 2016 to be a solid year for development due to the level of pent-up demand and the low level of new supply.

“There have not been many facilities built since the crisis, and there’s a tremendous need just to keep up with population growth,” he said.  Jernigan Capital expects the development cycle to last five to seven years, with the amount of development increasing each year until it begins to tail off later in the decade.

Meanwhile, Good said he expects to see Equity REITs continue their purchases of large portfolios as they seek to grow. At the same time, there is still a role for developers with real estate experience to fill in the tertiary markets that don’t interest the large REITs, Good noted. Good said developers in tertiary markets will offer more expertise than the original mom-and-pop owners, but they will still be small operators.