12% - 15% cap rates?

[Matt Everling]

Is it true when underwriting small storage facilities that you should use a high cap rate between 12% - 15%?

[Bill B.]

Are they about to be put out of business by a new giant competitor? Why else would they sell so cheap? You are basically telling them they are running it perfectly and there’s no room for you to improve operations. I don’t know of anything threatening office for most overbuilt. But certainly storage has to be a strong number 2.

I’m not saying there can’t be any sellers at that rate, but find out why 1) they’r willing to sell so cheap and 2) someone else didn’t snap them up with the hundreds of mailers they’ve probably received over the last year or two.