Former CyrusOne CEO Gary Wojtaszek Plans To Deploy Billions on RV and Boat Facilities
Gary Wojtaszek came out of retirement to accomplish something he has done before: Grow a company in an emerging type of real estate into a multibillion-dollar powerhouse. But this time, he wants to do it by tapping a lifestyle trend surging across America.
Wojtaszek retired from data center operator CyrusOne in early 2020 after spending nearly a decade transforming the small Dallas-based business into the world’s third-largest data center company. It was eventually bought for $15 billion by private equity giant KKR and investment fund Global Infrastructure Partners.
His new endeavor involves storage properties for recreational vehicles and other so-called big toys. He founded RecNation Storage in October 2020, and the company has raised over $800 million of capital commitments to provide space to house RVs and boats.
“Ironically, I have grown RecNation faster in my first two years starting this company than when I first started growing CyrusOne,” Wojtaszek said. “I’m planning to build a $7 billion company in five years. Lots of fun.”
Like CyrusOne, RecNation will be structured as a real estate investment trust with a national management platform. But unlike his CyrusOne days, Wojtaszek feels he has arrived early to RV storage investment.
“Early on, when I started with Cyrus, we were one of maybe 40 players in there with two big players and no one knowing who No. 3 was, and we built up the third-largest platform,” he told CoStar News.
RecNation is betting on an important point: The typical RV owner only uses their home on wheels about 20 to 25 days a year. That means owners need somewhere to store these large vehicles that are growing in popularity most of the time because many U.S. cities have ordinances on what can be stored in residential neighborhoods.
Taking On Rivals
For now, RecNation’s main competitors are small mom-and-pop shops, but no one has the national scale like RecNation, which has 53 locations in six U.S. states. Some of its closest competitors are Honey Bee RV Storage, with 15 locations across four states, and BlueGate Boat & RV Storage, with five locations in five states, according to Dave Knobler, senior managing director of investments for Marcus & Millichap, who helps lead the brokerage’s national storage group.
“RecNation is quickly becoming the 900-pound gorilla in the industry, with them being the biggest boat and RV storage company out there,” said Knobler, who has represented some of the sellers of the properties RecNation has purchased. “This is a good idea what they are doing, and it has been a long time coming.”
RV and boat storage has been largely overlooked by commercial real estate investors who have chalked it up as a mom-and-pop business — and those significant players look for yields elsewhere, Knobler said. But storing big boats and even bigger homes on wheels is a more stable asset class than traditional self-storage facilities, he said.
Even so, there are challenges. RecNation’s plans come as there has been a lack of liquidity for real estate with funds “completely drying up” in the capital markets to invest in this sector, Wojtaszek said.
When Wojtaszek started trying to raise capital for RecNation, “it was incredibly difficult. It took me six months to raise the least amount of money in my career,” Wojtaszek said. “I was probably rejected from 40 or 50 banks. Every single local bank in Dallas said, ‘This is a great idea, but we don’t have the capital to do it.'”
RV ownership has increased 62% in the United States over the past 20 years. A significant portion of that growth has been buyers between the ages of 18 and 34, with the median age of a first-time RV buyer dropping to 33 in 2021 from 41 in 2020, according to the RV Industry Association. The pandemic and remote work trends may have helped RV ownership grow in popularity among younger crowds, with potential buyers wanting a newer model recreational vehicle than the RV of their parent’s generation.
And despite the number of RV shipments declining since their 2021 peak partly because of rising interest rates, they are forecast to rebound in 2024, according to the RV Industry Association. More investors have noticed the rise in RV ownership’s popularity, scooping up and expanding RV parks across the nation and adding amenities such as pickleball courts, lazy rivers and fitness centers to increase occupancy.
Interest in Travel
“Interest in RVing remains high with full campgrounds this summer and a third of leisure travelers saying they would buy an RV,” Craig Kirby, president and CEO of the RV Industry Association, said in a statement.
With a high demand for RV and boat storage near major U.S. metropolitan areas, the right type of land is becoming increasingly scarce. For storage projects, a developer can build about 400 traditional mini storage units on about 4 acres or put about 150 boat and RV storage units on that same tract. The sheer size needed to house big recreational vehicles puts a further crunch on what is already a supply and demand imbalance and a big reason why RV owners quickly gobble up rental storage units for big vehicles, said Knobler.
That demand for a place to park a big toy is feeding a rise in rents. The average rental rates for RV and boat storage have jumped more than 75% over the past five years from $0.35 net rent per square foot to nearly $0.60 net rent per square foot, said Knobler, who has worked specifically in the self-storage sector since 2010.
“It’s gotten more and more difficult to develop boat and RV storage in the city, where people want to play and live and use these vehicles,” he added. “Gone are the days of gravel driveways in the country. Land is too valuable with rates going up so dramatically.”
Wojtaszek, 57, saw firsthand what he considers a national RV and boat storage shortage after the global pandemic interrupted his plans to travel abroad with his wife on a monthslong trip to Italy to celebrate his retirement.
He looked forward to good wine and even better food after leaving his nine-year leadership role in February 2020 at CyrusOne. But the travel restrictions forced the pair to trade in visions of a villa in Tuscany for the “ultimate road trip,” he said, visiting national parks and cruising the United States in an RV.
The couple bought an Airstream camper, but it didn’t take long for his plans to hit a snag: His neighborhood in the affluent Park Cities area has an ordinance against storing recreational vehicles, deemed an eyesore, at a residence. There’s even a daily fine.
Storage Space Shortage
He made a series of calls before finding it wasn’t easy to find a place to store a recreational vehicle in the Dallas area, and he began to “freak out,” knowing he had to pick up his new Airstream in two weeks without a place to put it. In desperation, he called CyrusOne executives hoping to park his newly acquired recreational vehicle at one of its data centers’ uncovered parking lots. They immediately agreed to the makeshift storage arrangement until a spot opened at an RV storage facility.
Soon, Wojtaszek and his wife were on their trip, taking in scenic national parks, small towns and big cities. Upon their return, they started to discuss investing in RV storage facilities — now that they had some firsthand experience. His offer on one property in Dallas snowballed into owning a handful in the region.
As business began to take off, Wojtaszek noted the attractive returns of RV storage, which he said has lucrative unit economics, much like data center storage.
“Once I started reaching out to capital partners, everyone wanted to do more in this space,” Wojtaszek said, with investors seeking to look outside the major property types of commercial real estate. “It was a change-up from data center storage to RV storage, but storage is storage, and they are pretty similar even if the real estate is a little different.”
The RV storage business seemingly started with property owners with extra land they turned into outdoor storage. Now, Wojtaszek and his team — made up of some former CyrusOne executives — are seeking to scale the business into a nationwide RV storage operating platform.
However, it’s been difficult to convince owners to sell properties, with interest rates quickly rising in the past year.
“I think we are going to see a lot of distressed properties come to the market because people are not going to have the capital for it,” Wojtaszek said. “But it’s hard to convince sellers their business is worth 30% less than it was last year.”
Property Management Challenge
RecNation also addresses what it refers to as a big hurdle for an institutional investor or REIT moving into the RV and boat storage sector: managing the real estate. RecNation is creating its own national property management business to accompany the growing portfolio of properties throughout the United States.
The management platform creates a potential exit for RecNation’s investors with a third-party management business to handle the day-to-day operations on behalf of a passive investor.
“Most real estate companies, in general, are not strong operating companies, they are mostly passive investments,” Wojtaszek said, adding an investor needs an operating partner to help grow a business successfully. “We spent a lot of time upfront automating things to operate things more efficiently. That’s what really creates the value.”
Compared with traditional self-storage units, described as a typical 10-foot-by-10-foot unit totaling 100 square feet of space, with a typical building height of 8 feet to 10 feet, RV and boat storage comes in much bigger sizes, with ground-floor access in a single-story building rather than a building with multiple floors like typical self-storage facilities. For RecNation, the sizes range upward of a 13-foot-by-48-foot storage unit totaling about 624 square feet of space — or roughly the size of a one-bedroom apartment.
RV and boat storage facilities need much more land with wide driveways for people to back their trailers and RVs into parking spots. Even with bigger units, they don’t equate to twice the rental rates, with RecNation’s smallest storage unit of a 12-foot-by-30-foot storage unit being priced at $175 per month — with the 10-foot-by-10-foot traditional storage units being priced around $160 per month in the same market.
Investors have historically focused on self-storage units because they are more efficient in seeking a return on investment with the ability to land more tenants per square foot of land, Wojtaszek said, but he has decided to take a contrary approach — much like when he began his career in data centers.
“I saw an unmet need and built a large platform in data storage, and I see a similar unmet need to RV and boat storage in this industry,” Wojtaszek said. “I used to rent space for computers, and now I just do it for RVs.”
RecNation has raised about $800 million in capital since its inception and recently increased its revolving credit facility to $500 million, Wojtaszek said. The amended facility was led by Truist Securities, with the backing of seven other banks, including Goldman Sachs, Morgan Stanley, RBC Bank, Raymond James, Key Bank, TBK Bank and Citizens Bank. Wells Fargo is also expected to soon add its hat to the group of investors backing the credit facility, Wojtaszek said.
RecNation is focused on adding real estate to its platform in the Sun Belt and U.S. mountain states, with the intention of scaling throughout the country by expanding to an estimated 350 RV and boat storage properties, he said. In the next five years, he said, RecNation plans to deploy $2.3 billion in capital with the pace snowballing on itself.
RecNation has increased its customer base tenfold, growing its customer base from about 1,300 customers to roughly 13,000 customers within an 18-month period. “Our game plan is to increase tenfold again” in the next five years to have about 140,000 customers, Wojtaszek said.
“We’ve been able to put more capital to work,” Wojtaszek said.