High Notes

By Alejandra Zilak

et’s start at the very beginning; a very good place to start. If you didn’t recognize that opening line, you’re missing out on the best musical of all time. But if you’re a fan of the Von Trapp family, welcome. You’ve come to the right place.

Kelly Gallacher, owner of The Gallacher Development, his wife, and their six children built a beautiful life in Salzburg, Austria. They decided to move there because all their kids played the violin and life presented them with the opportunity to pick a place to live in Europe. Technically, they settled in Mondsee, which means moon lake; the town is home to the church in which Fräulein Maria, the fictional governess from “The Sound of Music,” portrayed by Julie Andrews, walked down the aisle.

But let’s not get ahead of ourselves. Let’s start this story a bit earlier than that.

Gallacher was born in Salt Lake City, although his parents moved to the LaSalle mountains when he was a baby. “We lived about an hour from Moab,” he says. “My father ran the general store there and was a rancher.”

Eventually, Gallacher’s father went into business with his father-in-law. “They owned commercial laundry facilities, A1 Linen Supply, in Salt Lake City.” The business extended to Farmington, N.M., so that’s where he started school and lived until fifth grade.

The family moved around several times as they opened additional A1 locations. When Gallacher was about to start his senior year of high school, the family moved again. It was hard enough to move at that age, but to add insult to injury, he had to attend the rival school, where he played basketball and baseball.

Baseball earned him a scholarship to attend Ricks College in 1973. In 1975, he paused his studies to go on a mission trip to Mexico as part of the Church of Jesus Christ of Latter-Day Saints. He traveled all over the country, riding horses to the smaller towns. “It was perfect for me, and Spanish came easily to me.”

In 1977, Gallacher returned to the United States and enrolled in Brigham Young University, where he majored in business and financial planning, with a minor in Spanish.

In 1979, he decided to interrupt his studies again to go into the concrete and construction trade. “I figured that if people didn’t want financial planning or investment advice, they’d definitely want to build a home,” he says. “And generally, that requires concrete, so I chose that as my main skill.”

Gallacher started his working life in San Francisco’s Bay Area, at a real estate company called Equitec, where he built multiple homes with several of his friends. Once he learned this skill well, he decided to finish his college degree and enroll in BYU, where he made the track team on the 200- and 400-meter events for the 1979 and 1980 seasons.

After graduation, he became a property manager at Equitec. Soon enough, he was noticed by the higher-ups. The reason: “The costs of repairs and tenant improvements were about 50 percent lower than they should have been because I was doing it all myself,” says Gallacher. “My boss asked, ‘Who is this kid, and why is everything less expensive?’” After that, he moved up the company fairly quickly.

While working at Equitec, he ran into someone from his BYU days at his church: Marlene Woolf, who had just returned from her mission trip in Germany and became Gallacher’s wife in 1981.

Gallacher started working on a development project for an office building in Chicago in 1987. While that job was relatively short-lived, it gave him a story that he will forever share at dinner parties. “One November, I took the train from O’Hare into downtown at 2 a.m., and I had to walk to my apartment,” he says. About a block away from his home, he heard machine gun fire. “I immediately knelt down by a blue mailbox. The gunfire was nonstop, and at some point, I decided to grab my bag and take off running.” Right when he was about to do so, he heard someone yell, “Cut! That’s a take!” The movie “Untouchables” was being filmed. He sighed with relief. “I was so grateful.”

In 1988, Equitec was sold to Pacific Power and Light, and Gallacher started thinking about the next step in his professional life. He decided to form a new real estate development company with Ken Nitzberg and Tom Randlett. At first it was called NRG, for Nitzberg, Randlett, and Gallacher. But during their first meeting with investors, one of the attendees asked “What does that acronym stand for? No real growth?” So, during lunch after that meeting, they agreed to change it. They threw around ideas, including names of streets where they lived. Nitzberg happened to live on Devon Way, so they decided on The Devon Group.

They opened their offices in Oakland, later moving to Emeryville, Calif., and started doing real estate deals with major players in the industry. One day, Gallacher’s then brother-in-law, Lynn Storey, called him to say he had a deal in Houston that he wanted him to look at. It was a failed retail center in the Woodlands: two buildings, opposite to each other, 20,000 square feet each. It only had four tenants and it was in foreclosure. “Lynn said that we could buy it for really cheap.”

Gallacher didn’t know what they could do with the space, but Storey had a plan. “We drove to a self-storage facility. I turned to him and told him I can’t do storage. I do big commercial office buildings!” Storey, on the other hand, was a man on a mission. “No,” he replied. “Watch this.”

They walked in and asked if they could rent a unit, but the men were informed they were sold out. Then Gallacher decided to find out more about the industry by asking a lot of questions. “If we rented a unit, how much would it cost?” It would be $100 a month. That’s when the wheels started churning in his mind. “$100 a month on a 10-by-10? This could get me the same rent as a suburban office?”

Now Gallacher was interested. “How do you get tenants? What do you do when they move out?” And you could rent out space without having to pay a broker’s commission.

“How often can you raise rents?” he asked. “Whenever I want,” replied the storage owner. And there’s no need for tenant improvements every time there’s a new tenant. Gallacher looked at his brother-in-law and said, “I’m converted. I’m a self-storage guy. Best kept secret in the country.”

When they left, Gallacher called Nitzberg and told him everything he had just learned. “I really think we ought to do this.” At first, Nitzberg was hesitant, but the numbers were good. “We converted those buildings, and it was a massive home run,” Gallacher says proudly.

They experienced cash-on-cash returns of over 23 percent annually. “We thought we’d run it forever.” Alas, at some point, Storage USA offered to buy it, and the investors voted to sell. “We were shocked,” Gallacher says. “I asked why they’d want to get rid of the golden goose. They said they invested in the deal with their kids’ trust funds, and they had already made so much money from it, their kids could now buy homes without taking out mortgage loans.”

Gallacher and his partners decided to stay in storage. Once again, they took advantage of a shift in retail spaces. “Big-box retailers like Home Depot and Walmart were abandoning their smaller stores to open bigger ones. Those locations are typically owned by investment companies, and we approached them, offering to buy them.”

The Devon Group then decided to turn those big-box buildings into drive-thru storage facilities. “We were the only ones doing that concept back then, and people loved them,” says Gallacher. “We started doing the same all over the country, and it was well received.”

At some point, a former associate from Equitec went to visit their office in Emeryville. Once he found out what The Devon Group was doing, he was intrigued. But as it happens with all trips, soon it was time to go, and the former co-worker flew back home to the Netherlands. The phone rang a couple of days later. It was the Dutch guy. “I have a building for you,” he said to Gallacher.

The idea was outlandish, so The Devon Group sent two people from their team to kill the deal: Storey and Bill Woolf. They flew to the Netherlands, and after two days, Woolf called and said, “Kelly, I think there’s something here.” Gallacher insisted on killing the deal. “I don’t want to be in California doing business there.” But once again, the numbers were good and warranted additional investigation.

Thus, the first self-storage facility in the Netherlands was born. It was only a matter of time before more people from The Devon Group would fly back and forth to work on the project. “It took over a year for people to understand the concept of what self-storage was, but once they got it, they were interested, and the site leased up quickly, Gallacher recalls.

At that time, the self-storage secret was out in the U.S., and all the major bankers in Wall Street wanted a piece of the pie. Goldman Sachs came knocking and bought The Devon Group, and after about three or four years of working together, Goldman became intrigued with the work in Amsterdam. “They were fascinated with the Netherlands’ success, and they decided to expand in Europe, starting in London. They then opened facilities in Utrecht, The Hague, Berlin, Cologne, Marseille, Toulouse, and Lyon. We bought existing buildings and converted them into drive through self-storage,” says Gallacher.

Since they now had locations in several countries, Goldman Sachs wanted either Gallacher or Nitzberg to move to Europe to run operations and expand more. “I told Ken that my wife and I could go, but our one requirement was that Marlene could pick where we’d live.” She already spoke German because of her mission trip, and she had been to Salzburg during that time and loved it. Cue “The Sound of Music” soundtrack, because that had a lot to do with choosing to establish the family in Salzburg.

Their kids were 15, 13, 11, 9, 7, and 5, but they didn’t need a governess. Gallacher would fly every week to Amsterdam, where he would stay at an apartment during the week, then come back to his family during weekends. They all ended up learning German.

He became a member of the board of directors of the UK Self-Storage Association (the precursor to the Federation of European Self-Storage Associations), based in London. On Sept. 11, 2001, he attended a board meeting in London. At 2 p.m., the chairman came in and shared the news. “My wife just rang, and apparently, someone flew into your Twin Towers.”

London was shut down for three days, so Gallacher had to stay in the U.K. while his family remained in Salzburg. “To this day, I appreciate the Brits because they were so kind and supportive.” After three years in Europe, it was time to come home.

Upon returning, Gallacher became a board member and chairman of the California Self Storage Association for six years. Subsequently, he spent another six years as a board member of the Self Storage Association (SSA) and two years as the chairman of its Self-Storage International Committee.

In 2013, Gallacher parted ways with Devon and went out on his own, eventually entering a partnership with his brother Kevin. Together, they created Gallacher Development. During this new chapter, he became a member of the board of directors of Janus International, a role he held for over seven years. Since then, he has continued to develop properties in the U.S. and in Brazil.

As he reflects on his professional trajectory, he’s thankful that he’s spent most of it in the self-storage industry. “I love the camaraderie and how we all share helpful information with each other, even among competitors. Even when I do market studies on potential projects, I can go to a competitor, tell them the truth, and they share valuable insights. It’s such a friendly and supportive group.”

He’s also happy to provide advice to people just getting started in the industry. “I live by three rules: Understand that it will always take longer than you think. It will always cost more than you think, and you will make less than you think. If you understand those three components, you’ll do fine.” Gallacher also recommends reaching out to industry veterans to ask the contrarian questions. “Everyone asks about the best unit sizes. Ask those questions, but also ask ‘What size units would you not build?’ Nobody ever asks that, and depending on whether you’re in an urban or rural area, it can really have an impact on people actually wanting to rent them. Ask about the biggest mistakes and take notes about the lessons.”

While his career has taken him on many adventures around the world, today, the center of his life is his family. His mother, Sally Gallacher, is 94 and has 103 great-grandchildren. He loves to spend time with his now adult kids and his grandkids. “We’ve had 19 grandkids in total,” he says. They all call him Pappa. “But my wife’s name is the best name on the planet: Grandma Bubbles.” She was given that name by their first grandson when he was two years old. Now, all their grandkids call her that.

For Marlene’s 70^th birthday, Gallacher planned a big surprise. They were going to fly to London and Salzburg; at the airport, she saw that he had flown in all their kids to join them on their trip. “She had no idea. And then she turned around at the gate and saw everyone. Her face lit up. That’s what I like.”

While he’s still very much involved in Gallacher Development, he reflects on what makes him the happiest. “I’m very, very happy with my life, and my grandchildren are everything. All my needs and wants are taken care of. My joy is being with my family and serving in my faith.”