Self-Storage in the Southeast States: Real Estate Snapshot

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Are owners in your market starting to deal with expiring loans on their facilities? How are they handling this situation in light of the current lending market?

Barnhill: Some self-storage owners in our areas are beginning to deal with loan maturations on their properties. Owners with properties that are well occupied and performing usually are capable of obtaining local bank financing with debt-coverage ratios of 1.35 to 1.50 with rates in the 6.75 percent range. Owners whose properties have low occupancy rates such as in the 40 percent to 50 percent range and negative cash flow would have difficulty obtaining a good loan. In those cases, banks would be depending more on the financial statement of the owner.

Eisenman: A more pressing issue may be servicing existing debt by those whose cash flows are stagnant, declining or not yet stabilized. It will be interesting to see if lenders work with self-storage operators through loan restructuring to get through this difficult period. Lenders have plenty to occupy their attention with the housing crisis, bankruptcies, credit issues, Wall Street challenges and auto industry difficulties. Self-storage will be just a small segment of that matrix and may have the best prospects of weathering the storm.

Weaver: I do not have any recent experience with any owners that are attempting to refinance expiring loans. However, if these properties are well positioned in the marketplace, my assumption is that financing is available based on the criteria discussed earlier in this article. Lenders are still looking for solid performing properties with stabilized occupancies.

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