Global Storage Secures $4M for Retail-to-Storage Project
The firm plans to convert a former Sears store into an 854-unit facility.
Start Your Application and Unlock the Power of Choice$5.6M offered by a Bank$1.2M offered by a Bank$2M offered by an Agency$1.4M offered by a Credit UnionClick Here to Get Quotes!Memphis Conversion Project. Image courtesy of Mag Mile Capital
Global Storage Partners has received $4 million in financing to acquire and convert a former Sears store into an 83,040-square-foot self-storage facility in Memphis, Tenn. Mag Mile Capital secured the floating-rate loan, with interest-only payments for the first 36 months, followed by 30-year amortization for two years. Public Storage will manage the facility.
Located at 1200 Southland Mall, the redeveloped building will offer 854 units to the residents of Memphis. As a former retail store, the facility is next to major thoroughfares, including Highway 51 and Interstate 55, providing easy access and visibility to customers. There are three other facilities within a 3-mile radius of the facility, Google Maps shows.
The property is also near other small businesses, such as clothing stores, auto parts stores, and beauty supply stores. As the cost of warehouse space continued to increase across the country, small businesses often turn to self-storage units to temporarily store goods.
While population and economic growth have been stagnating in recent years, Memphis recorded strong job growth in the first months of 2022. And despite a small 0.2% dip in May, due to high inflation, the number of jobs still exceeded pre-pandemic levels. As of May, the total number of jobs in Greater Phoenix stood at 659,600, which is 0.25% higher than the number of jobs recorded before the health crisis, according to the Memphis Flyer.
Related Questions
What are the benefits of investing in a retail-to-storage project?
Investing in a retail-to-storage project can be a great way to capitalize on the growing demand for self-storage space. Retail-to-storage projects involve converting existing retail space into self-storage units, which can be a cost-effective way to increase the number of storage units available in a given area. Benefits of investing in a retail-to-storage project include:
- Lower operational costs: Retail-to-storage projects typically require less staffing than other types of investment properties, as most self-storage facilities are fully automated. This leads to higher profits and fewer headaches for investors.
- Recession-resistant: Self-storage is a recession-resistant investment, meaning that it will not be dramatically impacted by economic downturns or market fluctuations. Even during tough economic times, people still need to store their belongings.
- Higher ROI: With demand being high across the country, self-storage facilities can generate strong cash flow and ROI.
For more information on investing in self-storage, check out A Beginner’s Guide to Self-Storage Investing and 4 Ways Self Storage Is Recession Resistant.
What are the risks associated with a retail-to-storage project?
When considering a retail-to-storage project, there are a few risks to consider. First, the cost of converting a retail space into a storage facility can be high. Depending on the size and condition of the space, you may need to invest in new walls, floors, and other infrastructure. Additionally, you may need to invest in new security systems, climate control systems, and other features that are necessary for a storage facility. Finally, you may need to invest in marketing and advertising to attract tenants to the facility.
Another risk to consider is the competition in the area. If there are already a lot of storage facilities in the area, it may be difficult to attract tenants to your facility. Additionally, if the local market is not growing, it may be difficult to increase occupancy rates and rental rates.
Finally, you should consider the potential for tenant turnover. Self-storage facilities tend to have higher tenant turnover than other types of commercial real estate, so you should factor this into your projections. Additionally, you should consider the cost of tenant turnover, such as the cost of cleaning and repairing units after tenants move out.
How can investors maximize their returns from a retail-to-storage project?
Investors can maximize their returns from a retail-to-storage project by carefully considering the local market conditions, analyzing the competition within the market radius, and understanding the saturation level of the market. It's important to look at the population and job growth, the number of homeowners or renters in the area, and the proximity to university campuses, residential areas, or businesses. Additionally, investors should consider the level of competition within the chosen market radius and the saturation level of the market, which is measured by the gross square feet of storage space available per person. Currently, the average self-storage inventory per capita across the country is around 7 to 8 net square feet. A market with a per-capita inventory above the U.S. average is usually considered oversupplied, whereas anything below is undersupplied.
What are the most important factors to consider when investing in a retail-to-storage project?
When investing in a retail-to-storage project, the most important factors to consider are the local market conditions, the level of competition within the market radius, and the saturation level of the market. It's important to look at the population and job growth, the number of homeowners or renters in the area, and the proximity to university campuses, residential areas, or businesses. It's also important to consider the number of self-storage facilities nearby, any facilities under construction or in the planning stages, and the gross square feet of storage space available per person. According to Multi-Housing News, the average self-storage inventory per capita across the country is around 7 to 8 net square feet. A market with a per-capita inventory above the U.S. average is usually considered oversupplied, whereas anything below is undersupplied.
What are the best strategies for financing a retail-to-storage project?
The best strategies for financing a retail-to-storage project depend on the size of the project and the investor's credit history. For smaller projects, conventional loans from a bank, credit union, or other financial institution may be the best option. These loans tend to have the lowest interest rates and the longest terms, making them a good option for investors who are looking for stability. However, they can be difficult to obtain if you don't have a strong credit history.
For larger projects, an SBA loan may be the best option. The Small Business Administration (SBA) offers a variety of loan programs that can help finance a retail-to-storage project. These loans typically have lower interest rates and longer terms than conventional loans, making them a good option for investors who are looking for more flexibility. However, they can be difficult to obtain if you don't have a strong credit history.
For more information on financing a retail-to-storage project, please visit Commercial Real Estate Loans' blog.
What are the key differences between a retail-to-storage project and other types of commercial real estate investments?
The key differences between a retail-to-storage project and other types of commercial real estate investments are the size, complexity, and specialized knowledge required to manage them. Retail-to-storage projects are often larger and more complex than residential properties, requiring more specialized knowledge and expertise to manage effectively. Self-storage properties are generally easier to manage than data centers, for example. Additionally, self-storage facilities can be easily managed without an on-site property management team due to coded gates, kiosks, security cameras, and online rental options.
When investing in a retail-to-storage project, it is important to evaluate the market where you want to grow your portfolio. Major aspects to consider include population growth, location, existing facilities within a 3- to 5-mile radius, and the economic occupancy rate of the building. Popular financing options available for self-storage properties include the SBA 7(a) and SBA 504 loan programs, which are typically secured through banks or credit unions. However, life company and CMBS loans are also available.