Commercial real estate developer and investor James Street recently acquired Mr. Store It in Wilmington, N.C., for $8.5 million, but the North Carolina Department of Transportation (DOT) wants to remove a portion of the self-storage facility as part of a road expansion project. The DOT’s expansion of Military Cutoff Road requires the removal of about a third of the storage units and a business office from the property at 6947 Market St., according to the source. The project will also change the facility’s street access.
Street is hopeful he will be able to maintain the storage business despite the disruption to the property, Stephanie Autry, an attorney with Cranfill Sumner & Hartzog LLP, told the source. “One of the things we’re going to be trying to work out with the DOT is to make sure the access is going to be good enough so that he can stay there and keep operating a storage facility,” she said.
The DOT has offered Street more than $4 million based on its own appraisal of the property, but the Raleigh, N.C., businessman will counter with his own appraisal, according to Autry.
“At the request of the property owner, the condemnation request has been delayed, so the claim is still in negotiations,” DOT spokesman Brian Rick told the source. “The relocation of the affected storage units that are within the project limits has begun.”
It’s unclear if Street was aware of the street-expansion project when he purchased the business. The investor was “boxed in” by a deadline to acquire a “like-kind” property to continue receiving tax benefits under Section 1031 of the federal tax code, Autry told the source. Section 1031 provides a capital-gains exception and allows property investors to “postpone paying tax on the gain if they reinvest the proceeds in similar property as part of a qualifying like-kind exchange,” according to the IRS.
Street acquired the property as Streetsmart Storage I Wilmington NC LLC on Sept. 3 from Coastal Storage Inc., the source reported. The tax value on the property is $2.64 million, according to county tax records.
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