Smith: When a facility is sold, it is generally to an owner who already owns a self-storage facility. Even in smaller markets, larger owners will look at property quite a distance from where they are already established.
Is financing available from local banks or conduit lenders?
Bahrmasel: Local lenders have been the main source in the Illinois/Indiana markets. In some cases the larger banks either quit quoting on self-storage, or rates are not competitive. Conduit lending has seemingly dried up.
Goldman: Conduits are still on the sidelines and probably will be for at least another year. In the meantime, local banks are benefiting from their absence.
Hitler: I have not heard of any conduit lending in our area. Local banks are anxious to lend on storage facilities, but are careful in their criteria for approving the loan.
Jordan: In Minnesota, financing is primarily by local banks, but one banker I spoke with stated his firm would only lend to existing bank customers.
Smith: Local banks are still the source of funding for most purchases and construction.
Have credit problems impacted cap rates in your area?
Bahrmasel: When lending was freer, there were more available buyers searching to finance projects with cheap, highly leveraged funds. Cap rates have compressed, if not in tandem, at least closely following interest rates. While interest rates still remain low, tightening credit and underwriting standards have meant that projects need to generate more cash to get sold and need to be based on actual dollars produced rather than projections.