Water leaks. Many old buildings have pipes under the building that are very old and deteriorating. Have a qualified engineer test for leaks. We recently spent more than $10,000 to jackhammer inside a facility to get to a leaking pipe.
Environmental (Phase 1) testing: Yes! Yes! Of course, I know this is common to all classes of development and a financing requirement. But with an older building, and before you do much else, a clean Phase 1 is a necessity. If the report comes back ambiguous, don’t hesitate to go to a Phase 2. Don’t spend a lot of money on anything else until the property has a clean environmental report.
There are some elements that are common to all commercial redevelopment. However, with storage, they’re simply more critical. Here are a few to consider.
Title insurance and survey. It may seem obvious, but older properties must be vetted for encroachments, setbacks, easements and zoning compliance. Current use or lot coverage can mask a variety of these issues, which could seriously impact your site plan and unit mix.
Timing considerations. From the day you actually target a site location to the point at which a building permit is issued should take about six months. From building permit to grand opening might take an additional four to seven months, depending on the complexity and scope of your dream facility. You’ll probably want a spring opening. Try working backward from the proposed opening date to pick a target date for commencing construction.
Financial risk. I’ve tried to confine this discussion to some of the hurdles you might encounter on the way to a building permit. Really, the elephant in the room is financing, as many of you will need. To secure a loan, you’ll need a complete set of plans, pro forma and more.
From the bank side of the transaction, an independent appraisal must support the values being proposed in the pro forma. As you grizzled veterans of appraisal wars can attest, some of the fiercest battles we’ve fought have been with independent appraisers over valuation. But this is a topic for another evening around the campfire with a bottle of Maalox at hand.
I would like to close with, “In conclusion…” However, I hope this is just the beginning of a very profitable and interesting venture for you. Do not be deterred. The rewards are well worth the effort.
Lewis Pollack is a self-storage owner and managing principal of StoreSmart Development LLC, which operates facilities in six states under HAT Management LLC. A long-time corporate executive and entrepreneur, Pollack has been involved in the development and management of self-storage for more than 25 years. For more information, call 561.212.5350; e-mail email@example.com; visit www.storesmart.org.