Knabe Road Self Storage + Retail OMLand for Sale: 1.95 Acres

Price: $1,900,000Development proposal with full

financial summary:

Reasoning Behind Sectioning of Report:

• This report was wrote with the intention of conveying three points:

• What Needs to be Built for the Best Use of the Knabe Rd Development?• Self Storage + Retail

• What is the profitability of this venture?• Financial Summary: Excel Investment

Summary Of Knabe Road Self Storage + Retail Proposal

• What are the corresponding market data set points that show the present market value of a Self Storage + Retail Proposal in Temescal Valley CA?• Self Storage Lease Comps, Sales Comps and

Retail Lease Comps, Sales Comps and Market Survey and Analytics Reports Shown.

Synopsis of Storage + Retail Offering Memorandum part 1.

• Opening Page: Page 1

• Reasoning Behind Sectioning: Pg. 2

• Synopsis of Report: Pg. 3-4

• What Needs to be built. Pg. 5-10

• Zoning Information: Pg. 11-14

• Financial Summary: Excel Investment Summary Of Knabe Road Self Storage + Retail Proposal

• Financial Summary: Pg. 15- 28

• Rent Comps for Self Storage: Pg. 29-35

• Self Storage Sales Comps: Pg. 36-39

Part 2. Continued on page 4

Synopsis of Storage + Retail Offering Memorandum part 2

• Self Storage Market Reports: Pg. 40-42

• National Capital Market Outlook 2020: Pgs.43-44

• Demographics and Investment Outlook for Self Storage 2020: Pg. 45-46

• Capital Markets and Supply Wave: Pg.47-48

• South Riverside Storage Market in comparison to US Survey data: Pg.49-50

• Pad Site Retail Leases: Pg. 51-75

• Retail Construction Reports: Pg.76-82

• South Riverside Retail Sales Analytics Report: Pg. 83-84

• Demographics: Pg.85-88

What needs to be built for best use?: Storage Inline Property + Retail Pad Site• Property APN: 283-110-044,

• Land SF: 84,942 SF. The Land is Vacant and Shovel Ready. Price $1,900,000

• Zoning: Community Development that Allows for Storage + Retail.

• The proposed structure is the following:

• A Self Storage that is 56,250 Sq. Ft. This is a three story Inline property.

• A Pad Site Retail Structure that is 2 units totaling 7500 Sq. Ft. This is a two story structure. Bottom floor 5000 SF, top floor 2500 SF.

• Total Project Cost: $10,040,000

• Land Acquisition $1,900,000

• Hard Cost + Soft Cost $8,140,000

• FINANCIAL EXECUTIVE SUMMARY HYPERLINK

Architectural Designs:

Self Storage 56,250 SF Retail 7,500SF

Architectural Designs of Knabe Road Proposal:

IDEAL TENANCY: SELF STORAGE REIT & RETAIL NATIONAL TENANT

Property Has Freeway Visibility And is Located in area that has need for Self Storage.In addition to that due to Freeway visibility Property Has Potential to earn $50,000 annually from Signage.

Zoning Information : Pages 11, 12 & 13.

Zoning Information

Zoning Information with Plot Map

Zoning Information hyperlink to google drive.

Please click here to find a hyperlink to all zoning related information.

Financial SummaryPgs. 15-28

Financial Executive Summary Excel Investment Summary Of Knabe Road Self Storage + Retail Proposal

Financial Synopsis:

• Page 16 : Financial Executive Summary

• Page 17: Synopsis

• Page 18: Total Project Costs

• Page 19: Financing Assumptions

• Page 20: Financial Summary of Self Storage assumptions + Pad Site Retail.

• Page 21: Gross Scheduled Income Projected from proposal.

• Page 22: Retail Operating Expenses.

• Page 23: 5 Year Net Operating Income Summary

• Page 24: Sales assumptions

• Page 25: Total Unlevered Cash Flow

• Page 26: Debt Financing

• Page 27 Total Leveraged Cash Flow

• Page 28: Levered and Unlevered Economics

Total projected costs for buying Knabe Rd at 1.65M & developing a 63,750 SF self storage + retail commercial property for best use:

SOURCES AND USES

SOURCES %

Debt $ 5,650,000 55.0%

Equity $ 4,621,500 45.0%

Total $ 10,271,500 100.0%

USES $/SF $/Unit

COST $ 10,000,000 $ 157 $ 66,667

Closing Costs $ 40,000 $ 1 $ 267

Acquisition Fee $ 100,000 $ 2 $ 667

Capital Improvements $ 75,000 $ 1 $ 500

Leasing Costs $ - $ -

Loan Fees $ 56,500 $ 1 $ 377

Interest Reserve $ - $ - $ -

Operating Deficit $ - $ - $ -

Total $ 10,271,500 $ 161 $ 68,477

Financing Assumptions for Knabe Road Storage + Retail Development 2020

FINANCING ASSUMPTIONS

Loan to Purchase Price 56.50%

Loan Amount $ 5,650,000

Interest 3.25%

Amortization 30

Monthly Payment $24,589

Payoff on Sale $ 5,045,832

Loan Fee 1.00%

DSCR Test

In Place NOI $ 354,371

DSCR 1.10

Max Payment $ 26,846

Max Loan $5,650,000

Financial Summary of Self Storage + Retail Development Proposal for Knabe Rd.

• Lot Size: 84,942 SF

• Proposed Total Development Square Footage: 63,750 SF

• Inline Self Storage section of proposal: 56,250 SF

• Current Rents avg. for Self Storage in Temescal Valley, CA: $1.35 per SF rent collected monthly.

• Gross scheduled income of Self Storage: $911,250

• Pad Site Retail section of proposal: 7500 SF

• Current Rents Avg. For Pad Site Retail properties in Temescal Valley CA: $2.775 per SF rent collected monthly.

• GSI of Retail Pad Site: $250,000

• Temescal Valley, CA Self Storage Market shows in 2020 April that the Vacancy Loss of active projects is 10%. The avg. vacancy of self storage has been less than 5% for the presiding years 2015-2019. As for Retail vacancy loss for Pad Sites is 5% but Retail in general is 15%. For simplicity we went with a 10% vacancy loss in our Financial assumptions because that what is shown in market reports for April, 2020 Leasing Status of Self Storage Facilities.

• Only 2% drop in vacancy has been reported for Self Storage properties since the beginning of March which is when the Corona Virus affected the US on an economic scale. Meaning this investment option is healthy if presented rent roll is achievable and market research shows need for Self Storage in Corona CA.

• Net Operating Income, Operating Expenses and Full Financial Summary can be found Here: Excel Investment Summary Of Knabe Road Self Storage + Retail Proposal

Gross Scheduled Income w/ Rent Assumptions and Market Assumptions:

RENT ASSUMPTIONS MARKET ASSUMPTIONS

Unit Type No. of Units Annual In Place Market Time to Market Downtime Vacancy Loss 10.00%

Storage 125 $ 911,250 0.50 0.25 Credit Loss 3.00%

Retail 2 $ 250,000 0.50 0.25

Annual Rent Growth 5.00%

Expense Inflation 2.00%

Parking

Signage $50,000 50,000

Knabe Road Storage +

Retail Proposal

Operating Expenses

OPERATING EXPENSES

Total $/Unit % of EGI

Property Taxes 130,000 $ 867 12.34%

Insurance 11,250 $ 75 1.07%

0.00%

Mechanical 8,000 $ 53 0.76%

Utilities 28,650 $ 191 2.72%

Management 31,614 $ 211 3.00%

$ - 0.00%

Repairs & Maintenance 7,500 $ 50 0.71%

Landscaping 5,000 $ 33 0.47%

Pest Control 250 $ 2 0.02%

Other

CapEx Reserves 15,000 $ 100 1.42%

Total 222,264 $ 1,482 21.09%

The projected 5 year Net Operating Income of the Knabe Road Self Storage + Retail Proposal:

PROJECTED CASH FLOW

Year 0 1 2 3 4 5

INCOME

Gross Potential Rent (In Place) $ - $ 1,161,250 $ 1,196,088 $ 1,231,970 1,268,929 1,306,997

Gross Potential Rent (Market) $ - $ - $ - $ -

Other Income $ - $ 50,000 $ 52,500 $ 55,125 $ 57,881 $ 60,775

Gross Potential Income $ - $ 1,211,250 $ 1,248,588 $ 1,287,095 $ 1,326,810 $ 1,367,772

Less Vacancy $ - $ (121,125) $ (124,859) $ (128,710) $ (132,681) $ (136,777)

Less Credit Loss $ - $ (36,338) $ (37,458) $ (38,613) $ (39,804) $ (41,033)

Effective Gross Income $ - $ 1,053,788 $ 1,086,272 $ 1,119,773 $ 1,154,325 $ 1,189,962

OPERATING EXPENSES

Property Taxes $ - $ (130,000) $ (132,600) $ (135,252) $ (137,957) $ (140,716)

Insurance $ - $ (11,250) $ (11,475) $ (11,705) $ (11,939) $ (12,177)

Electricity $ - $ - $ - $ - $ - $ -

Gas $ - $ (8,000) $ (8,160) $ (8,323) $ (8,490) $ (8,659)

Water/Sewer/Trash $ - $ (28,650) $ (29,223) $ (29,807) $ (30,404) $ (31,012)

Management $ - $ (31,614) $ (32,588) $ (33,593) $ (34,630) $ (35,699)

Repairs & Maintenance $ - $ (7,500) $ (7,650) $ (7,803) $ (7,959) $ (8,118)

Landscaping $ - $ (5,000) $ (5,100) $ (5,202) $ (5,306) $ (5,412)

Pest Control $ - $ (250) $ (255) $ (260) $ (265) $ (271)

Other $ - $ - $ - $ - $ - $ -

CapEx Reserves $ - $ (15,000) $ (15,300) $ (15,606) $ (15,918) $ (16,236)

Total Operating Expenses $ - $ (237,264) $ (242,009) $ (246,849) $ (251,786) $ (256,822)

Net Operating Income $ - $ 816,524 $ 844,263 $ 872,924 $ 902,539 $ 933,140

Sales Assumptions for Proposed Development’s Exit Strategy

SALES ASSUMPTIONS

Exit Cap Rate 6.75%

Sales Commissions 5.00%

Disposition Fee

$/SF $/Unit

Gross Sales Proceeds $ 13,824,298 $ 217 $ 92,162

Less Sales Commissions $ (691,215) $ (11) $ (4,608)

Less Disposition Fee $ - $ - $ -

Net Sales Proceeds $ 13,133,083 $ 206 $ 87,554

Total Unlevered Cash Flow w/ Net Sales Proceeds

Net Sales Proceeds $13,133,083

Year Number 0 1 2 3 4 5

Total Unlevered Cash Flow (10,040,000) $ 641,524 $ 844,263 $ 872,924 $ 902,539 $14,066,223

Debt Financing

DEBT FINANCING Year 0 Year 1 Year 2 Year 3 Year 4 Year 5

Loan$

5,650,000

Debt Service$

(295,070)$

(295,070)$

(295,070)$

(295,070)$

(295,070)

Loan Fee$

(56,500)

Payoff$

(5,045,832)

Total Debt Cash Flow$

5,593,500 $

(295,070)$

(295,070)$

(295,070)$

(295,070)$

(5,340,902)

Total Leveraged Cash Flow

Total Leveraged Cash Flow $(4,446,500) $346,454 $549,193 $577,854 $607,469 $8,725,322

Year Number 0 1 2 3 4 5

Levered and Unlevered Economics and end of Financial Summary of Knabe Road Proposal

Unlevered Economics

Unlevered Economics

Equity Invested $ 10,215,000

Profit $ 7,287,472

Multiple 1.71x

IRR 12.95%

Levered Economics

Levered Economics

Equity Invested $ 4,621,500

Profit $ 6,359,791

Multiple 2.38x

IRR 22.17%

Rent Comps for Self Storage in Temescal Valley CA Pgs. 29-35

Self Storage Rent Comps

• Pages 25-29 for comps:

• Examples given Extra space Storage and Cube Smart

• Rents Collected on Avg. for 10 x 10:

• Extra Space : $185 for 100 SF = 1.85 SF rent asked monthly.

• Cube Smart: $135 for 100 SF= 1.35 SF rent asked monthly. Closer to our development proposal.

Self Storage Rent Comps Page 1, Extra space

Self Storage Rent Comps

• Temescal Valley CA.

• Location: 250 N Cota St, Corona, CA 92880

• Company Extra space Storage.

• Date of comps May 2020

Self Storage Rent Comps Pg. 3: Cube Smart

Date of Rent Roll: May 2020

Self Storage Rent Comps Pg. 4: Cube Smart

• This rent roll is during Corona Virus Period. Normal Rent Roll for Temescal Valley is between $1.35 – $1.8 per SF for monthly rent collected.

Self Storage Rent Comps Pg. 5: Cube Smart

Self Storage Sales Comps:Show Appreciation of 32% Appreciation in 4 Years.

Pages: 37-38-39

Self Storage Sales Comps section 1. Property #1, Comp #1

Self Storage Sales Comps #2 for property #1, year 2016, Sold for $1,490,000 more in 2020.

32% Appreciation in 4

Years.

Self Storage Sales Comps Property #2, Comp#3.Other Sales can on Costar didn’t have prices disclosed.

Self Storage Riverside – San Bernardino Market Report

Pgs. 41-42.

National Capital Market Outlooks 2020:

Pg. 44

Investors increase investment in smaller markets and Self Storage

Capital markets remain healthy Pg. 46

Capital Market Liquidity and 2020 Capital Market Outlook and How Supply

Wave Transforms OutlookPg. 48

Riverside Market Shows that it is balanced for supply chain. Temescal Valley, CA though has a

high demand for Storage due to being stuck between Corona and Lake Elsinore and having limited self storage supply in the area. Pg. 50

Pad Site Retail Leases Pg. 51-75

Pad Site: Retail Pad Tenant Comps:Rent Per SF: $24.14 annually Monthly: $2.016 per SFFor Pad Site Tenants Rent is shown to be $3.916 per SF monthly, these are at power centers. So the rent roll we proposed for Knabe Rd. Development was $2.775 per SF Monthly.

Knabe Road Retail Comps Report:16 Comps Shown out of the 26 comps found between 2017-2020 in Temescal Valley and Corona CA

Knabe Road Retail Comps Report Page 3: Showing the Last 10 Comps of the 26 Comps Report.

Knabe Road Retail Lease Comps Rent Summary 2017 – 2020

Knabe Roade Retail Lease Comps 26 shown in 3 page format #1

Knabe Road Retail Lease Comps 26 shown in 3 page format #2

Knabe Road Retail Lease Comps Pg #3

Knabe Road Retail Lease Comps Pg. #4

Knabe Road Retail Lease Comps Pg. #5

Knabe Road Retail Lease Comps Pg. #6

Knabe Road Retail Lease Comps Pg #7

Knabe Road Retail Lease Comps Pg. #8

Knabe Road Retail Lease Comps Pg. #9

Knabe Road Retail Lease Comps Pg #10

Knabe Road Retail Lease Comps Pg. #11

Knabe Road Retail Lease Comps Pg. #12

Knabe Road Retail Lease Comps Pg. #12

List of major retailers nearby:

South Riverside Retail Submarket up to 12,000 SF RBA

South Riverside Retail Leasing History & Fore:

South Riverside

Retail Market Leasing

Availability:

South Riverside Retail 4 Star Market 2019-2020 Leases

South Riverside Retail 3 Star MarketLeaases

South Riverside Retail Submarket Growth & Rent Per SF $ Charts

South Riverside Retail Construction Reports:

Pages: 76-77-78-79-80-81 & 82.

Up until 2015 There was 362,176 SF of Retail Space Commercial Space for Lease Total in South Riverside Market in 2015, image on map of South Riverside Market is shown on pg. 78.

In the past 2 years 2018-2020: 522,785 SF more has been built for Retail.

2020-2022: shows an additional 106,528 SF currently being built and projected for the project completion within the next 8 Quarters.

South Riverside Retail Submarket Construction History and Forecast

South Riverside Retail Construction within last 12 months

South Riverside Retail Submarket Undergoing and Proposed Construction Projects 2020

South Riverside Retail Submarket 2020 Proposed Construction Pg. #2

South Riverside County Submarket Retail Sale Graph:

South Riverside Retail Sales Analytics

Page 84 for detail

South Riverside Retail Sales 2019-2020

South Riverside Demographics: Pgs. 85-88

Knabe Road Development Demographics:

Knabe Road Development also has signage LOI.Earning the property $50,000 in potential income annually.

Knabe Road Development Consumer Spending:

Costar Demographic Report for Knabe Road Development