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Let's get to business
In July 2021, we closed on two self-storage facilities in Tennessee for $1,075,371.
In November 2022, one of them appraised at $3.13M.
Two weeks ago, we sold it for $2.125M.
Let’s talk about it.
These were your classic value-add projects – totally mismanaged and ripe for turnaround.
The properties were located in Clarksville (2110 Golf Club Ln, watch a real video) and Savannah (935 Pickwick Rd).
Both facilities were in terrible shape, with no website, no online presence, and an absentee owner who lived 600 miles away.
It was pretty obvious why these properties were underperforming.
The Savannah property was managed by someone who was likely struggling with dementia.
The Clarksville property was even worse – the manager was living on-site and pocketing cash from renters under the table.
Clearly, the first step was replacing management and installing professional systems to get these operations back on track.
Executive Summary of The Deal
We financed this deal with bridge lender.
Here is our summary of debt memo:
Z Equity Group is purchasing off market 2 value add self storage facilities in Tennessee.
Clarksville facility is 21,724 SF, has 234 storage units and sits on 1.6 acres.
The Savannah facility is 14,600 SF, has 81 units and sits on 2.97 acres. Both facilities are significantly mismanaged.
The owner is 77 years old and lives 600 miles away.
Clarksville property manager is suspected of intentionally
mismanaging the books and Savannah property manager has dementia.
Currently, rents are over 30% below market.
Economic vacancy in the Clarksville facility is over 50% and in the Savannah facility is over 40%. They have no online presence and take only checks or CASH.
Turning around is very straightforward. Replace existing management to offsite professional management.
Sign up with self storage automatic collection software, install automatic gates and keypads that connect to software to start leasing online.
Raise rents and occupancy to market (competition at Clarksville is 95%-100%).
Savannah has more saturation. We intend to hold Clarksville log term and Savannah to fix and flip.
At Clarksville, we'll do facade makeover, install automatic gates, keypads, repave asphalt, install new signs.
We'll also change outside lights to LED, repair/replace non-working doors, convert property manager apartment to additional 17 self storage units, convert front building to climate control building, install security system, paint exterior.
At the Savannah facility we'll trash out a small bay warehouse, repaint exterior, repaint property manager's apartment, replace A/C, seal coat the driveway, set up web, online collections and self storage software.
The total budget is expected to be $1,477,650 with the sponsorship seeking financing at 80% loan-to-Cost ("LTC") with an interest rate of 10% and 2% points with 18 months term.
While self-storage can work, I have found small bay industrial to be more consistent.
The anticipated loan amount will be $1,182,120.
Stabilized value of Clarksville expected to be $1.79 million and Savannah — $425K.
Curious how it all turned out? Read about the deal that put my storage thesis to the test.
