Free Event - Alts Expo on Dec 13th
In this webinar, Russ Colvin highlights two self storage projects located in Opportunity Zones.
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You can visit the Official OpportunityDb Partner Page for the YourSpace America OZ fund to:
- View beautiful high-resolution images.
- Learn key details about the fund and related projects.
- Request more information from the fund sponsor.
- Track record for YourSpace America and its principals.
- Recent history of the self storage industry, including the impressive returns over the last two decades.
- Case studies highlighting past self storage projects that Russ has completed.
- Highlights of the Phoenix Stadium self storage project, including the economic drivers of Phoenix.
- Highlights of an additional self storage project in las Vegas, including the characteristics of the market and submarket.
- Live Q&A with OZ Pitch Day attendees.
Featured On This Webinar
Industry Spotlight: YourSpace America
YourSpace America, Inc was formed as an investment vehicle to provide superior risk adjusted returns in the growing self-storage industry. This commercial real estate asset class is characterized by strong cash flows, low break-even margins and best in REIT universe returns for the last 28 years.
Learn More About YourSpace America
- Visit YourSpaceAmerica.com
Jimmy: Russ Colvin on stage now, with YourSpace America Self-Storage. He’s got two different self-storage deals that he’s going to be presenting to you right now, one of which is in Phoenix, and the other is in Las Vegas, Nevada. Russ, there you are. How you doing?
Russ: Very good. How are you doing?
Russ: Well, good afternoon or good morning, depending on where you are. I appreciate everyone taking the time from their busy schedules to participate in our presentation. Like to tell you about myself and our company, and discuss track record, and then present the Phoenix and Owens projects, which are two of the most compelling self-storage investment projects I’ve seen in my career.
I have spent my entire adult life in commercial real estate. That’s about four decades. About half on the banking side, and half on the investment side. So, commercial real estate is kind of in my blood, I guess you could say. We’ll start with the track record, and then the Phoenix project, followed by the Owens project. The Phoenix and the Owens project are both Opportunity Zone investments, so they’re 10-year hold. I started investing and developing in self-storage about 11 years ago, and have had projects in California, to New Jersey, to Massachusetts, Texas, Missouri, Oregon. Current projects in Las Vegas, Phoenix, and Tucson. All the projects have been successful. IRRs have averaged around 31% not including some of the recent projects in San Diego, New Jersey, and Las Vegas, which would have even higher returns than I just mentioned.
I was CEO of North American Self Storage for five years. We had many successful projects. In the past three years, I’ve done a number of projects with investors, and now we focus solely on YourSpace America. I have made a lot of money for investors, something we’re very proud of. We created YourSpace America because we wanted to acquire and develop best-in-market, industry-leading projects, and hold them long enough to realize their full economic financial potential. And holding them until they reach their potential is important, as we will discuss today. And we have a reputation for building quality projects, which is important, and is really part of the disposition process too, because when you go to sell them, you want people to know that you build a quality project, so they’re anxious to buy it.
Okay, next slide, disclosure. Everybody should read this. Next slide. Our purpose, as I mentioned, we created YourSpace to provide superior risk-adjusted returns for investors, by developing best-in-class projects, and developing the best products in the industry. Next slide. Why YSA. We have a great team, in terms of management, acquisitions, underwriting, everything. It’s an excellent team. Especially adept at finding good projects, which is not easy if you have really high standards in self-storage. Next slide. The self-storage industry, many of you may know, the self-storage industry has become one of the most popular types of commercial real estate investment because of its safety and strong performance in all economic cycles. Some people call it recession-proof, I call it recession-resistant, and it’s perceived as a very safe investment. Next slide. Then, next slide. REIT sector fundamentals. This is an important thing to look at when thinking of investing in self-storage. Next slide. So, for the past, really, 29 years, self-storage has been the top-performing property type in the NAREIT index, National Association of Real Estate Investment Trusts, with average returns about 18.83% from ’94 through 2022, actually. Next slide. As you can see from the slide here, self-storage outperformed every other product type, from industrial to office, to residential, retail, everything. And that’s over a nearly 30-year period, so it’s a pretty phenomenal track record.
Next slide. Next slide. CMBS delinquency. This is an interesting bit of information, too. It shows that another factor in self-storage safety, it has the lowest delinquency rate of any type of real estate, which adds to the safety picture, if you will. Next slide. These are some case studies I’ll run through, really, in the interest of time, and we picked a few to run through, on the track record, which you may find interesting, but track record is important because it, I think, speaks about how people will likely perform going forward. Next slide. This was a project we did in the Sacramento market, Rancho Cordova. It was sold in 2019, not long after completion. Investors did very well. Their total return’s about 42%. This was a conversion project. Next project. Next slide. This is another one we did in the Sacramento market, and was sold in 2021. Investors did very well again. This was a conversion. But, again, investors…this was a successful investment. Next project. Next slide. This project, Peabody, which is a suburb of Boston, this was also a very successful project. This was a conversion. It was sold in 2021. Turned out to be a very nice project. Next project, slide. This is a project in the Massachusetts market, Springfield, which is the third-largest city in Massachusetts. This was a conversion. The end product turned out very nice, and it was sold in 2021. And again, investors did very well.
Next project. This was a project in Escondido, California. This was a ground-up development. A lot of people consider this is the nicest self-storage facility in north San Diego County, California. My partners decided to sell this, and this is one, under the YourSpace model, we would still own it. Anyway. But it’s a very successful project. Next project. This is one in Worcester, Massachusetts, second-largest city in Massachusetts. This was a conversion. Ended up being the nicest property in this market, in central Massachusetts. We sold our interest to our partner, who later sold it to Life Storage. Next slide. Las Vegas Rancho. This is a property that’s currently under construction in Las Vegas, on a major thoroughfare, Rancho. And certainly, when it’s completed, will be the nicest self-storage facility in this three, three and five-mile radius. Before we even started construction, we had an offer to purchase the property for about $10 million more than our cost. We decided not to accept it. We figured we could wait a year to two years after completion and probably sell it for $15-plus million over cost, but nonetheless, should be a very successful project.
Next project. This is one we’re gonna cover today, the Las Vegas Owens project. As you can see from this rendering, when it’s complete, it’s gonna be a beautiful project. Next slide. This is another project in the Las Vegas market. We acquired this site a couple of months ago, and it’s on 15 acres. This is going to be the nicest RV and boat/self-storage facility in the Las Vegas market when it’s completed. But it gives you, looking at the rendering, it gives you an idea of what we build. Next slide. This is the Stadium project, the Phoenix project, 815 to 901 Jackson Street in Phoenix. You know, Phoenix now is the fifth-largest city in America. There’s a great, great growth story that goes with this property. The downtown area is booming, and has been an enormous success story in the last 10 years. If you watched the World Series, with the Diamondbacks, this property is 650 feet from Diamondback Stadium, so huge, huge visibility for people that are at the stadium, and it’s about 300 feet from 7th Street, which is a major arterial in and out of Phoenix. When this property is completed, it will definitely be the nicest facility in the market, probably the most visible facility in the market. And the competition in this area, with one exception, a newer Public Storage facility a couple blocks away, the competition for the most part is older projects, mostly non-climate-controlled projects, so this project should be a very strong competitor when it’s complete. It’s also an undersupplied market, in terms of this current supply of self-storage, so, which is something we always look at.
The building is gonna be about 168,000 square feet, with about 125,000 net rentable area, approximately 1225 self-storage units. Strong population metrics in the three-mile and five-mile, about 100,000 in a three-mile, about 362,000 in the five-mile. And another interesting fact about this site, there are 17,000 residential properties in planning or development in a five-mile radius, and if you assume about three people per household, that’s over 50,000 people. Next slide. This is another rendering of the proposed property, but it gives you an idea. It’s obviously a rectangular design, given the location, but it’s gonna be a beautiful project. Next slide. As I mentioned, about 1225 units. The project is fully approved, but we’re working through getting our building plans all signed off right now. So we’re thinking it’s gonna be the end of the year for ground-breaking. We’re seeking about $9.4 million in equity, of which we’ll put in about 10% of that. I, as I mentioned, YourSpace America, created in 2021, with a strong history of successful projects. This will be a state-of-the-art generation five facility, with solid, strong security. So, you will have to be a tenant in order to get into the building. That’s something that we put in all of our projects’ security system. We monitor the outside, we monitor the inside, so anybody that’s visiting a facility or at a facility, loading, unloading, whatever, they can always feel a sense of safety at the property, which is important, because about two-thirds of the people who actually use self-storage are women. And that that’s important that they have a feeling of safety in-site.
Next slide. Again, this, total project costs, about $26.8 million. We’re raising about $9.4 million in equity. We’ll put in about $17.4 million in debt. We project that the returns, on average, over a 10-year period, are gonna be about 24.66%. Investor equity multiple of about 4.02, so if you put $100,000 in, you get your money back plus about $300,000. We also are looking to refinance in month 24, so people who need to pay taxes or something will have some cash to pay that. So, these returns that you see are based on as if somebody left their money in, but our plan is to return the capital to investors in month, on or about month 24, depending on market conditions. Which is, I think, a compelling aspect of this investment. Next slide. This gives you, it’s a map here. This, photos gives you an idea of, you can see Diamondback Stadium from the property. You can see a few aerials here that show the location in downtown Phoenix, but it’s really in the heart of downtown Phoenix. Next slide. This really shows the, in a snapshot, sort of the growth that’s occurred in Phoenix. This starts in 1980, but pretty phenomenal growth that’s gone on there. And it continues. But definitely a great market. Something that we look at, as I mentioned, we look at supply, we look at population, and we look at population growth. We look at what the competition is, and this property checks all of those boxes, excellent.
Next slide. This is a site plan of the property. As you can see, rectangular shape. But it should be very easy access, as you can see, all the parking in the front, and the loading, should be very easy access for customers to just pull up and load, unload, and not have to walk a long distance to get to their units. Next slide. Project summary, really goes into, again, the equity, the debt. When we’re planning to start construction. We closed the site June 15th, so we own the property. We spent about a year and a half prior to that working on getting the approvals in place for self-storage. As I mentioned, we plan to start construction in the fourth quarter. We think it’ll take about 12 months to build, so we’ll probably start lease-up in the fourth quarter of ’24, and expect to achieve full stabilization about 36 months later. I actually think it’ll be sooner, but we have a conservative analysis. I’d rather be conservative. Again, just a breakdown of all of the soft cost, hard cost, etc. Next slide. Again, some more information on the development budget for the property. When you have time, something to look at. Next slide. These next two slides are a 10-year pro forma, and this was actually prepared by one of our REIT management partners. I think this is a pretty conservative analysis, but basically, based on a 10-year hold, and looking at this net operating income projection in year 10, this project’s gonna cost about $26 million to build, is gonna probably sell for more than $62 million in 10 years. And that’s at a 4.5% cap. In 2021, I sold three properties at sub-4% cap rate. So, given the quality of this project, I would hope we can do better than 4.5%, but nonetheless, even that is extremely compelling. Okay?
Next slide. Next slide. This slide here is important. Anytime you’re building anything, you need to run a tight ship, and we do. And we use probably the top contractor in the United States in self-storage, ARCO Murray, the third-largest in the country, but probably the largest in self-storage. We believe in having, you know, full liability insurance on all of our projects, and having strong site security during the construction project. We use online project monitoring, so that you can literally, from anywhere in the world, go online and see what’s happening at the project, if you choose to, and we pass this information on to our investors, so that they can utilize it if they choose as well. We have weekly project management calls with our contractor, tight regulations about site safety. We monitor the project schedules carefully. All things that you need to do to have a smooth-running project, all things you learn from experience. But nonetheless, if you practice all of these things, you should have a successful project. Next slide. As I mentioned, ARCO Murray is contractor. Having the right contractor is important building anything, if you’re doing a home improvement. And then, we use REIT management. In this particular case, we signed a management agreement with Public Storage, which is the largest owner and manager of self-storage in the world. And they think this is a fantastic project, and they’re picky about the projects that they manage. They don’t manage anything that they wouldn’t want to own. So, just, and in that fact, in and of itself, having Public Storage manage it tells you something about the project.
But to the general public who see this property, it’s gonna look like it’s a Public Storage. They won’t know the difference. They are great managers. They do excellent, quality reporting, very detailed monthly reporting, which we share with all of our investors, obviously. But again, great management, great reporting, all of those things. And the other thing we do, too, is, we work closely between the contractor and the manager all through the development process, so that the end product, in terms of, you know, the number of units, the layout, the office construct, the signage, everything that’s important about the project, is done properly, by the team working together through the process.
Okay. I think that ends the Phoenix project. Now I’ll switch over to Owens. So, as you can see from this rendering, this is going to be a beautiful project. It almost looks more like a retail or office project than self-storage, but that’s the goal. A lot of support from the city of Las Vegas for this project. It’s right along Interstate 15. It’s gonna be a very high-visibility project when it’s completed, and the city is fully behind it, supports it. Next slide. Disclosure. Should all read the disclosure. Our purpose, I mentioned this, you know, in the last presentation, so I won’t go through it again. Next slide. Management team, etc. I won’t go through all that. Next slide. I don’t think we had this in the last slide, but this kind of gives you a overview of our executive team and our board of directors, our board of advisors. In our Board of Advisors, we use people, you know, from the industry, and we think we have a strong team here. Next slide. So, this next slide gives another picture of the rendering. So, this project, 120 West Owens in Las Vegas, it’s a 2.39-acre site. As I mentioned, it’s along Interstate 15. The site’s about 30 feet above the highway. The building will be 50 feet high, so at the top, you’ll have the signage. So, the signage will be about 80 feet above the freeway, so it’ll be difficult to go north or south on Interstate 15 and not see this property. There’s about 175,000 cars a day on Interstate 15, or vehicles per day.
Again, strong population numbers. You have about 500,000 people in the five-mile radius. It’s a growing population. This building is gonna be about 158,000 square feet, with about 116,000 of net rentable, approximately 1189 units. Next slide. One of the things, just touch on this for a moment about Las Vegas, why is it growing like it’s growing? Because, you know, it’s a very business-friendly environment. Probably the best restaurants in the world, entertainment, professional sports teams. As most of you probably know, the Oakland Raiders have moved there and they built a $2 billion stadium. The Oakland A’s are moving there. I mean, there’s a reason why businesses and sports teams and all that are moving there. The best infrastructure in the United States in terms of the city’s overall infrastructure, a very low tax environment, but just things that attract people. Next slide. Another rendering of the property, a little bit more close-up rendering, but again, a very attractive property. Next slide. Again, 120 West Owens, Las Vegas. The building square footage. Total project cost is about $23 million. Got a great deal on the site. We expect to have all of our permits in place by the end of the year. Process we’ve been working on for over a year. We expect to start construction about year-end, and we expect to end about 12 to 13 months later, with stabilization in about three years after that, December of ’27.
About $15 million in construction financing, about $8.1 million in equity. Next slide. Again, just the highlights, about 1189 units, YourSpace America is a sponsor. This is gonna be another generation five self-storage facility, like Phoenix. You know, top facility in the market, fully climate-controlled, high security. So, there is that element of safety, again, for our tenants, which is important, for any unauthorized intrusion, on the outside or the inside or whatever. Just the economics, for a moment, which I think is important on both of these projects. We designed these projects to be investor-friendly, which means that we take a lot less, the investors take a lot more. The end result, though, is that we have people that are invested and interested in investing in our projects. So, we have a 10% preferred return, 80/20 to a 15%, 70/30 thereafter. And, you know, we think that’s in the best interest of the investors. This is another project with a, you know, about a 4 multiple. So, again, if you put $100,000 in, you’re gonna make a little more than $300,000 in 10 years. If you are an Opportunity Zone investor, and we hold it for 10 years, that means that your gain is not taxable. It also means that the depreciation that you take during the term of ownership, which is significant, and we can supply that to you offline, okay, but that there’s no recapture on the depreciation. So, not only is there no tax on the gain, there’s no recapture on appreciation, so that’s almost another level of return, and this is being structured as a program to return equity to investors around month 24 as well. Okay? Which is a great feature of what we’re doing so people can pay taxes and so forth.
Next slide. I have another recapture of what I was just mentioning. Total project costs, about $23 million, $8 million in equity, about $15 million in debt. A 4.10 multiple, a 24.4% IRR, and return of capital. Next slide. Again, same information. Assuming somebody invests starting now, construction beginning the end of the year, all of that. It gives a breakdown of the land cost, financing costs, hard costs, soft costs. Probably more information than you want, but if somebody wants to go in and look at it in detail, they have it. Next slide. Environmental, geotechnical, all these things are signed off, are in place. I mentioned the construction. All the zoning entitlements are in place. It’s been fully approved by the Las Vegas Planning Commission and the Las Vegas City Council. One of the most compelling things about this project is the lack of competition in this market, okay?
Next slide. So, if you look at this slide right here, you can see this, the project and the proximity to Interstate 15. There’s a couple of these. Next slide. This is, as I mentioned, one of the most compelling aspects about this property, that we look at the amount of competition in the market, and this project is significantly undersupplied. In the two-mile radius, it’s probably 500,000 square feet undersupplied. And even after our project is built, it’s still gonna be significantly undersupplied. But, so, we’re going to be in an undersupplied market, and we’re going to have the nicest facility in the market. It’s not difficult to figure out what in terms of, you know, attracting clients. In fact, when we got the project approved, the City Council said, “We need self-storage here.” Anyway. So, something that’s very important to anybody that invest in self-storage, this is important, and we really hit the jackpot on this one in terms of competition.
Next slide. The only development besides our project, there are two projects that are a little more than two miles out, that are under development. Even with these, though, it really is still gonna be a significantly undersupplied market, and it won’t affect our two-mile radius, so we’re still gonna have that huge supply deficit in the two-mile radius for this property. Next slide. This slide sort of gives you a view of where the project is in terms of Las Vegas, and Interstate 15. Next slide. This is a little bit more graphic. So, you can see in this slide the little red dot here. This is our property, okay? And to the right is Interstate 15. You can’t get any closer to the highway than that, right? As I mentioned, 175,000…about 15,000 cars a day in front of the property, and then the cars on the highway.
Next slide. This slide is the project site plan. So, you can see the ingress and egress, the entrance out front. You can drive around, and there’ll be several areas to load and unload in the front, on the side, and the back. We think it’s a very good layout, given the site design. Next slide. I mentioned this in the previous presentation, but something, again, that we, all of these things we call construction operations protocol. In terms of how we operate the project, very important. But something we can go into offline if anybody’s interested. Next slide. Same thing I mentioned in the last presentation. The quality of the contractor, the quality of the management, both world-class here, okay?
At this point in time, probably we will choose Public Storage to manage the property. But in any case, you know, the best self-storage managers on the planet. And of course, any manager needs to be managed, so we supply the asset management, and we monitor them all very carefully. But when you have a team like this, and we’re all working together, the investors are the beneficiaries. Next slide. So, this slide indicates basically where we think the property is gonna sell in year 10. We think it’s gonna sell for about $58.6 million, okay? Which is a lot more than our cost, okay? Anyway. Next slide. These next two slides, again, are the 10-year pro forma. Same as we had in the last presentation.
Anyway, so, that pretty well ends the presentation. I think we’re going to have Q&A after this. And my information is here, so anybody that wants to contact me can email me, contact me on cell, whatever, anytime you choose. And as my wife says, I don’t like to talk about anything else than self-storage, so I’m always available to talk about self-storage.
Jimmy: That’s awesome. Well, what else is there to talk about, Russ?
Russ: Yeah. Well, there you go. Anyway.
Jimmy: We are at time here, with Russ’s formal presentation. I did wanna see if we had any questions here before we move on. Anyways, one question for you, Russ, before we get you over to your breakout session. “Do you have a debt commitment yet, and at what terms?” I know you mentioned that was gonna be a big part of the capital stack.
Russ: We actually have debt offers from a number of different lenders. We are assuming that we are going to have a higher cost of debt in the first two years and then we’re going to refinance it at a lower cost of debt. We mentioned the refinance around month 24. We’re assuming…we’re being very conservative. We’re assuming we’re gonna pay about 10% the first two years, and then we’re gonna go to 6%. Most of the offers are less than that, but just trying to be conservative.
Jimmy: Very good.
Russ: So, yeah. We have people, a lot of people talking to us. That’s an interesting thing, real quick, about self-storage. A lot of other property types are more difficult to get financed, but there’s a lot of interest in financing self-storage, just because it’s a safe investment. Anyway.
Jimmy: There’s a lot of demand for it, and you’re in two great locations, it looks like.
Russ: Yeah, anyway. Thank you all.
Jimmy: Russ, thank you so much. Great to see you again.
Russ: Thank you.