There is always a bull market somewhere. With the stock market continuing to whipsaw and bonds getting pricier, investors are looking for decent returns—and some are finding them.
Self-storage buildings, anyone? How about abandoned railroad beds, cellular towers, student apartments or parking facilities? Such unglamorous niches, once shunned by the investing elite, are performing well in 2010, even as the Dow industrials limp along.
If you haven't heard about these options yet, it may be because the smarter money is getting there first. In some cases, private-equity firms, pensions and college endowments, which are cutting their exposure to stocks, are looking into these and other offbeat investments.
Just ask Ken Nitzberg, chairman and chief executive of Devon Self Storage Holdings LLC in Emeryville, Calif. He says he is fielding more calls from investor groups, and has partnered with institutional investors including the State of Michigan Retirement System and Goldman Sachs Whitehall Funds. He also manages properties for college endowments and high-net-worth families.
Mr. Nitzberg says he got into self storage in 1993. Initially, "we looked down our noses at it," he says. But after his first venture—the conversion of a strip mall into a self-storage facility—produced a solid return, he was hooked. Since then, while other investors fixated on stocks or more upscale real-estate projects, Mr. Nitzberg has focused on storage. He says the company now owns or operates 48 facilities in 12 states.
Mr. Nitzberg says many of his properties are producing annual returns of 8% to 10%, and a few are exceeding 15%, "which in a 3% Treasury world is pretty good".
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