Inside Self-Storage

JAN 2019

Inside Self-Storage (ISS) is an information source for industry owners, managers, developers and investors covering news, trends, facility operation, finance, real estate, construction, development, marketing, technology, insurance and legality.

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Generally, bank and credit loans are considered short- to medium-term loans from one to seven years that can have a fixed or floating rate or, in some cases, a combination. Interest rates are typically some of the most competitive available. However, in exchange for access to this money, these institutions want a deeper relationship that may include deposits, lines of credit or additional lending opportunities. Pros: • Short- to medium-term loans are available, from one to •ve years. • Advance rates range from 70 percent to 75 percent LTV. • Fixed and ƒoating rate options are available. • Construction and expansion loans are available for qualifying borrower and properties. • Nationally chartered credit unions have no prepayment restrictions. Cons: • Longer-term solutions for stabilized properties are typically limited. • Non-recourse lending options are limited but might be available at lower LTV ratios. • These loans are more relationship- focused and may require a broader depository relationship. Private Lending Finally, there are private lenders, which include long-term private lenders, hard-money lenders and bridge lenders. These offer the most flexibility as they're willing to lend on non-cash-flowing properties, properties in lease-up, refinance of discounted payoffs, and mortgage-note purchases. In exchange, interest rates are typically between 10 percent and 15 percent. Due to the high cost, these loans are typically measured in months rather than years. Loans are also typically full-recourse obligations and may require additional collateral to be posted. Pros: • Loans often close in a matter of days rather than weeks or months. • Deals can be underperforming or non-performing; however, there needs to be a clear roadmap to a permanent •nance solution. • There are long-term •nancing options for clients looking for alternatives to CMBS. Cons: • These loans are short term in nature, lasting months rather than years. • Additional collateral is often required to be posted for the loan. • These loans are the highest in interest-rate and transaction costs as well as upfront points. How to Choose? The current interest-rate environment makes this one of the most desirable times shop for a self-storage loan. While there are many options, the difficulty arises in selecting the right type of financing and then pushing through to receive the actual capital. Hiring a mortgage professional to help navigate these choices and determine the best solution can ease the process. Whichever loan you choose, this primer offers a starting point for successful banking. Noel Cain is senior vice president of The BSC Group, where he works with clients to provide debt and equity financing that fit each self-storage owner's goals. He also has significant experience in underwriting, development and cash-flow modeling as well as due diligence and site analysis. For more information, call 800.605.7880; visit www.thebscgroup.com. January 2019 I ISS 27

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