Investment Overview

Lakeridge Self Storage is a 59,645 rentable-square-foot self storage facility located in Midlothian (Dallas-Fort Worth), Texas, and is offered for purchase at $9,500,000. The facility was built originally in 2005 and has been expanded periodically since then. A total of approximately 11.37 acres (24 parcels) featuring drive-up units, climate-controlled units, semi-permanent "portable" units, fully-enclosed boat / RV units, covered boat / RV units, and uncovered open parking will convey to a new operator at closing. Combined, that represents 558 storage/parking units – 536 of which were occupied as of August 2023. While the vast majority of the property's revenue comes from those month-to-month self-storage leases, additional revenue is generated via a residential dwelling, as well as an office suite – both of which lie adjacent to the storage facility. As of August 2023, the facility is approximately 96 percent physically occupied (based on rentable square footage) and approximately 70 percent economically occupied. Using January - June 2023 annualized figures, if purchased at the list price, a new operator will be in position to generate unleveraged yields above 6 percent by the end of year-two. Additional value could also be created by expanding the facility with drive-up or climate-controlled units on the undeveloped land on the westernmost part of the property. This proposition becomes even more compelling when one considers the fact that the current owner/operator “manages” the facility using nothing more than his personal cell phone. To be sure, formal revenue management, marketing, or lead generation strategies are virtually nonexistent at the property. Furthermore, because the owner is a long-term Midlothian resident, he has been historically reticent to raise rents despite market conditions that clearly warrant it. More specifically, as of August 2023 the subject property’s street rates reside approximately 25 percent below the five-mile market average. In fact, approximately 75 percent of the facility’s current tenants have been leasing their unit for more than one year at an effective rental rate that is lower than their corresponding street rate. This equates to approximately $10,970 per month in storage rental income that a new owner could reclaim virtually immediately upon purchase – thus eliminating approximately 62 percent of the delta between Current Storage Rental Income and End Year-One Storage Rental Income. These value-creation opportunities are bolstered even further when viewed within the context of a submarket that is currently experiencing the initial phases of an unprecedented growth cycle as a variety of residential, commercial, and industrial projects are in various stages of development. Jerry Jones, the owner of the Dallas Cowboys, recently announced his purchase of a 120-acre tract less than one-mile away from Lakeridge Self Storage at the southwest corner of Interstate-35E and U.S. Highway 287. Mr. Jones’ development company, Blue Star Land, has partnered with Dallas-based Lincoln Property to develop the tract. The mixed-use project will consist of urban-residential, industrial, e-commerce, retail, and commercial sites. The industrial portion of the tract will encompass approximately 70 acres, approximately 15 acres on the south side of the tract will be dedicated to multi-family construction, and the remaining highway frontage will be allocated for retail usage. The developers were attracted to the site’s visibility and access from two different highways, and they have already received zoning approval for the project. Separately, Dallas-based Hanover Property recently announced the builder line-up for its $950,000,000 master-planned development in Midlothian, called BridgeWater. Located less than three-miles away from Lakeridge Self Storage to the west, the 966-acre development will bring 2,000 single-family homes, 160 townhomes, 26 acres of commercial property, and 42 acres of industrial real estate to the area. Development of BridgeWater’s first phase is already underway and will include 470 residential lots. In fact, Hanover executive Ben Luedtke recently commented “We’re releasing more lots in this first phase than we originally anticipated based on the high market demand”. Perhaps the most appealing component of the opportunity is the incredibly attractive seller-financing available for a well-qualified investor. To be sure, the seller is willing to finance the acquisition at a 4 percent interest rate at 70 percent loan-to-value ratio, 25-year amortization, and five-year term with a balloon payment.