Alterra’s Secret Sauce: Public Companies That Need Industrial Outdoor Storage

A construction company’s ejection from a Boston crane yard a little less than a decade ago is as unlikely a place as any to start an industrial investment empire, but the partners of Alterra Property Group realized it was not a heavy lift.

Leo Addimando, Alterra’s co-founder and managing partner, was trying to do a favor for a friend whose crane business merged with Maxim Crane Works, a crane rental agency, just as his former company’s lease expired. The landlord wanted the crane yard back to flip for another purpose, but Addimando’s friend didn’t have a new location lined up and was in a bind.

Addimando, a Philadelphia native, had experience working with cranes since his previous firm had primarily developed hundreds of multifamily apartments. So he worked to find another location for the crane business in Revere, a suburb north of Boston, in 2017. Then he jumped on several similar deals involving storage sites, including a sale-leaseback the following year in which Alterra purchased 17 properties from Maxim and leased the lots back to the seller for seven to 12 years.

“I didn’t know much about Boston real estate, but he insisted I help,” Addimando said. “We did a series of those, including four locations for them and the sale-leaseback. It was very serendipitous after that.”

The Philadelphia-based property investment company with 124 employees has become one of the nation’s most significant players in industrial outdoor storage (IOS). The subsector is frequently overlooked — IOS sites are often little more than large fenced-in parking lots and a modest building — yet it has a market worth about $200 billion and attracted $1.7 billion from institution capital in the past year alone, according to Colliers.

Since its founding in 2012, Alterra Property Group has closed more than $3 billion in real estate transactions and raised $2 billion in equity capital. The company has acquired or developed 300 IOS properties in 37 different states as of the first quarter of this year, while working with some of the nation’s largest players in infrastructure and logistics, including Amazon, FedEx, United Rentals and Builders FirstSource.

Much of Alterra’s success has come from filling out a team with the wherewithal to understand the nuances of the market and the specialized needs of prospective tenants.

Addimando met Jeff Pustizzi, Alterra’s co-founding partner and general counsel, when Pustizzi represented lenders in real estate financing for a Philadelphia-based law firm. Addimando recruited him away in 2012. Today Pustizzi manages the company’s finances, accounting and oversight, as well as its transactions and leases, which are largely concentrated on the East and West coasts and in the Southwest.

“We look at certain areas where we see growth economically, population-wise, and where we can sustain yields of deals,” Pustizzi said. “Certain areas have become overpriced and are tougher to maintain a standard of yield that we look at for our ventures. But tenants let us know where they’re looking too, and we’re constantly getting feedback from them.”

Then they brought in Matthew Pfeiffer, a Blackstone alum who worked for the Philadelphia private equity firm CenterSquare, in 2017 to jump-start Alterra’s IOS platform. Now he oversees day-to-day acquisitions and asset management as well as raising and structuring equity and debt for its business initiatives.

Industrial outdoor storage deals aren’t as flashy as those that already have build-to-suit warehouses on top of them in areas close to highways. Most of Alterra’s transactions are in the $5 million to $10 million range and its properties aren’t much larger than 10 acres each, although the value of a portfolio full of them can climb into the hundreds of millions of dollars. 

Its team realized early on that while demand had been increasing, the supply of outdoor storage lots was growing more limited as owners contemplated rezoning their properties to build valuable warehouses or self-storage buildings, or to charge more for rent.

“The supply and demand balance gives landlords pricing power. It’s not just the scarcity of the asset,” Pustizzi said. “When you have that imbalance and when a tenant comes up for a lease renewal, because of the scarcity of the options, it gives landlords the ability to increase rents.”

Even though the IOS market was highly fragmented and largely consisted of individual business owners, Alterra’s leaders realized that if you calculate the number of industrial parcels in metropolitan areas it added up to a large market that surpassed $12 billion per year. Alterra has been able to maintain an edge in the IOS market by creating a large proprietary database of transactions and information from tenants, and by using machine learning and artificial intelligence tools to gauge demand. They also realized they didn’t need to spend much to make their storage sites attractive to future tenants.

As Alterra searched for tenants to add to its roster, one thing soon became clear: The best scenario was to find publicly traded companies specifically looking for more space for their fleets of trucks, construction materials and other infrastructure.

“The secret of IOS is they’re credit tenants — the lease structure is triple-net, they pay for all taxes and reimbursements. And then underneath all that you can acquire at attractive yields,” Pfeiffer said. “So you have great supply and demand, a very low capital expenditure, and higher cash flows. Every institutional investor wants something like that.”

Alterra’s first major investor was J.P. Morgan Asset Management, which teamed up in the fourth quarter of 2019 to launch a $300 million joint venture to purchase IOS properties for semitractor-trailer parking, cargo containers and building materials. By 2024, Alterra sold that 51-property portfolio, whose operating sites in 14 states were 100 percent leased, to Peakstone Realty Trust for $490 million. Then, in February, Alterra acquired another IOS portfolio from TruGreen for $43 million in a 25-year sale-leaseback agreement. This time the portfolio consisted of 16 properties spanning a total of 326,400 square feet across 15 cities.

Alterra’s expertise as an IOS operator and its ability to assemble and flip its portfolio impressed Eastdil Secured’s Nick Murphy, who worked on the Peakstone deal.

“They are the largest vertically integrated IOS platform in the U.S. and likely the world, and are one of the most respected investors in the sector, possessing a competitive advantage with its large data set of IOS sale and lease comps,” he said. “They have also shown the ability to leverage their existing scale and tenant relationship into organic deal flow.”

Alex Shields, an associate vice president at lender Bridge Commercial, who has brokered over $150 million in transactions with Alterra, appreciates the team’s flexibility and its willingness to build relationships with brokers and tenants over the long term.

“They’re a group that does value relationships, and they’re willing to potentially negotiate with brokers to help make it work, even if their bottom line gets a little tighter,” Shields said. “They see it from a macro perspective that allows them to execute quicker than other folks, and it has paid dividends for them.”

Alterra will have to continue to be flexible in the face of a volatile economy. Construction of new warehouse space slowed last year as the industrial market grappled with oversupply and increased vacancies in places like California’s Inland Empire and the Dallas-Fort Worth area. If President Donald Trump is successful at imposing steeper tariffs on overseas goods, especially from China, warehouses could find themselves with far less inventory in the future. 

But Addimando insisted that industrial outdoor storage remains a stable investment because of insatiable demand. He noted that Alterra had one of its strongest leasing quarters in a decade in the past 90 days thanks to tenants’ demand for infrastructure storage space — an IOS niche tied to the machinery and materials needed to execute 2021’s Infrastructure Investment and Jobs Act.

“Our business is underpinned by one major factor: the imbalance of supply and demand. It’s not a short-term phenomenon,” he said. “Everyone is tired of having big warehouses and trucks in their neighborhood, and you are seeing more vacancies. The dynamics of supply and demand are in favor of being a landowner of IOS real estate right now.