"Value add/Expansion opportunity 45 minutes outside of Atlanta. Annex Self Storage is currently 98% occupied. This is one of two opportunities that 5050 Storage Partners is offering in Newnan, GA."

- 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: "Annex Self-Storage is located in Newnan, GA which is 45 minutes SW of Atlanta. Newnan has experienced great population growth over the last two decades. Today the city of Newnan boasts more than 46,000 full-time residents. The asset is currently 98% occupied."

"There is an opportunity for an immediate expansion of a bi-level building. The concrete pad and wall are already in place. The expansion would add approximately 10,350 SF and 98 units increasing the gross potential income by $16,102 a year."

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 is 59.6% in year 2 and 50.5% in year 3. During the 2007-2009 downturn self-storage on a national level held occupancy levels around 80% on a national scale."
• "The expansion will provide an opportunity to increase both the top and bottom line. The expansion will also reduce the all-in price per square foot cost. Once completed the cost basis will be reduced to $144.70 This cost is very close to the replacement cost."
• "Newnan currently has over 1,700 residential units either planned or under construction. With an average household size of 2.8 people per household in the trade area that equates to an additional need of 40,000 sqft of storage demand."

What is your investment strategy/business plan?

D. Brent Wright Jr., 5050 Storage Partners: "The investment strategy and business plan will focus on a few key areas:"

• "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."
• "Expansion: The expansion will be a bi-level building. This reduces construction costs slightly as only one concrete pad will need to be poured. The wall is already in place. The cost to build this expansion will be less than a brand new build. The expansion will add approximately 10,350 SF. Once completed the property will consist of 458 units and 57,499 SF."
• "The expansion and existing customer rate improvements are projected to add $333,158 in NOI by year 3. At a 6.25% cap rate that equates to a $5.3M value creation."

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 4.5% 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 6.25% 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. An institutional buyer or REIT is the most likely takeout candidate for the asset due to its location, property size, and asking price."
• "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. By 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.