Warehouse converted to self storage, final numbers and deal break-down
We just closed on our 6th self-storage conversion project! This one is a 65,000 sf old textile and hosiery warehouse in downtown Burlington, NC! We are converting it to 45,000 Net Rentable Square Feet of climate controlled self storage. Thought I would post the details all in one place for those that have messaged and asked us about here, so here goes!
We purchased the building for $1.3 million, with the construction costs of converting that much space to storage and with interest reserves, we are all in on the project for $5 million. We are converting the the space to 525 climate controlled self storage units, upfitting with LEDs, already sprinkled, 65k SF gross, converted to 45,000 Net Rentable. Average NRSF price for the market is $19.53 per square, we typically price 15% below market average at $18.18 blended rate per square foot. Feasibility study and 3rd party verification shows extremely high demand in a very underserved market.
Financing on this deal is $1.5 million raised from investor partners, all in for $5 million, $3.46 million financed at 65% LTV, 6.25% interest (banks still have funds earmarked for storage that are lending at competitive rates because it is considered to be a very stable asset class), 3 years of Interest Only payments, 25 year amortization.
That puts our Gross Potential Income at year 2 at $946k, and we typically increase rents once we hit 60% occupancy. The Gross Potential Income at year 5 is $1,094,946. At a 6 Cap, this puts a stabilized valuation on the property of $13.3 million. The 10 year valuation with GPI of $1,397,460 at a 6 Cap comes in at $17.5 million.
The beauty of that kind of Value-Add is that we can typically Refi at 60% LTV and double our investor money and pull out several million for ourselves, all of which is a Non-Taxable event because it is by way of refinance. That way we don't stress the asset and it continues to cashflow with an unlimited return. Next one under contract is closing in August, 3 Letters of Intent out, and hoping to do 6-8 projects this year! We just passed the $100 Million Assets under management mark, and shooting for $500 Million in stabilized assets under management in 5 years. Hope this helps.