"Experienced Sponsor: Currently owns and manages 3,000 units in an 80-mile radius, Purchase price is below replacement cost, Property has a history of high occupancy, Mismanaged asset, rental rates are below market by 30%+"

- D. Brent Wright Jr., 5050 Storage Partners

Top Questions

All answers are provided by the sponsor, 5050 Storage Partners, or its representatives.

Why are you buying this property?

D. Brent Wright Jr., 5050 Storage Partners: "This property is thematic to the strategy which is smaller markets, mismanaged assets, deferred maintenance, and is highly occupied. These opportunities provide cash flow on day one with upside through existing customer rental rates increase, increased move in rents, and provide a stable cash flow to the investor."

"The property will represent 5050 Storage Partners' 7th transaction in an 80-mile radius. This property is a great bolt-on to 5050 Storage Partners' existing portfolio."

What are the most important aspects of this investment opportunity for the investors?

D. Brent Wright Jr., 5050 Storage Partners: "The acquisition of the property is not overleveraged. 65% LTV is a comfortable leverage point for this kind of asset. The break-even ratio for occupancy is 64.5% in year 1. During the 2007-2009 downturn self-storage on a national level held occupancy levels around 80% on a national scale. This provides the property with a solid margin of safety."

"The property has a long history of occupancy and it was the ugliest property in the market from a curb appeal standpoint. The asset has already been painted and the curb appeal looks very nice now. The paint crew began working four days after closing. However, with all the deferred maintenance items the property stayed relatively full. That shows the strength of the market in terms of demand for self-storage."

"This will be the 7th asset that 5050 Storage Partners owns and manages in an 80-mile radius. 5050 Storage Partners over the past 18 months has built a nice portfolio of properties in the immediate area. A portfolio sale is the most likely exit."

What is your investment strategy/business plan?

D. Brent Wright Jr., 5050 Storage Partners:

• "Existing customer rates: 5050 Storage Partners utilizes best-in-class software for revenue management. Since implementation revenues of both top line and bottom line have grown by 25%. Existing customer rates are a key part of the business plan as it is one of the fastest ways to increase the property's performance."
• "Top line rate growth: Street rates are monitored on a daily basis and in some instances, the rates will change on daily basis depending upon supply and demand. Having a first-in-class revenue management system allows for quick decision-making across the growing storage portfolio."
• "Capital Improvements: The facility was painted four days after closing. Over the course of the next four months replacement of all the access controls, new signage, security cameras, and general property will clean up to further the curb appeal of the asset."
• "Add ancillary income: 3rd party tenant insurance, lock sales, enforce late fees, enforce the lien process, and much more. These items will add over $22,000 a year in income by year 3."

How has COVID-19 impacted your business plan?

D. Brent Wright Jr., 5050 Storage Partners: "COVID-19 had a minimal impact on the business plan. There were a few municipalities around the country where self-storage was impacted. Mainly larger cities like LA, New York, etc. Overall COVID-19 had a positive impact on the business. Self-storage is defined by four fundamental drivers (Death, Divorce, Disposition, and Downsizing) but during COVID a 5th "D" emerged. Decluttering became the main focus during COVID as Americans decided to organize their lives but also needed to repurpose rooms in their homes or apartments because of remote work. Demand during COVID was very strong for the asset class. There was a short period of time when states were under a state of emergency. If a state of emergency is issued operators can not follow the typical lien process or push existing customer rates. This only disrupted operators for a few months and the impact was minimal."

What are the risks and how are you mitigating those risks?

D. Brent Wright Jr., 5050 Storage Partners:

• "Rising Interest Rates: the current debt terms are fixed at a 4.75% interest rate."
• "New Construction: New construction can always pose challenges. History shows existing customers tend not to move out because there is a better located or newer product in the trade area. The main issue typically arises out of seeing some softness in the move-in rates. Having revenue management software will take new construction into account to make sure the move-in to move-out relationship stays in line."
• "Exit Valuation Risk: The exit cap is 6.35% or 125 basis points higher than the going-in cap rate. This provides a good margin of safety. If cap rates were to increase to an exit of 7% the opportunity would provide a 14.25% Net IRR to the investor."
• "Slower Demand:The demand for self-storage has been very high over the past 24 months. Occupancies remain at all-time highs across most assets. There is a risk of a slower economy, recession, lack of movement via home sales, etc. History has proven that self-storage performs well in both good times and bad. Not overleveraging the purchase provides a greater margin of safety if tough economic times do indeed arise."
• "Inflation: Self-storage leases are month-to-month leases. This provides the ability to raise rental rates every 30 days if desired. This is not a standard operating procedure. The standard practice is to increase the rental rates 6 months from the rental and then every 11 months after. This turn is faster than office, industrial, and multi-family providing the ability to be a better hedge against inflation."

NOTE: All answers provided by the sponsor, 5050 Storage Partners, or its representatives.