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STORAGE MAX OFFERING MEMORANDUM 1
STORAGE MAX
OFFERING MEMORANDUM
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N O N - E N D O R S E M E N T A N D D I S C L A I M E R N O T I C E
Confidentiality and DisclaimerThe information contained in the following Marketing Brochure is proprietary and strictly confidential. It is intended to be reviewed only by the party receiving it from Marcus & Millichap and
should not be made available to any other person or entity without the written consent of Marcus & Millichap. This Marketing Brochure has been prepared to provide summary, unverified
information to prospective purchasers, and to establish only a preliminary level of interest in the subject property. The information contained herein is not a substitute for a thorough due
diligence investigation. Marcus & Millichap has not made any investigation, and makes no warranty or representation, with respect to the income or expenses for the subject property, the
future projected financial performance of the property, the size and square footage of the property and improvements, the presence or absence of contaminating substances, PCB's or
asbestos, the compliance with State and Federal regulations, the physical condition of the improvements thereon, or the financial condition or business prospects of any tenant, or any
tenant's plans or intentions to continue its occupancy of the subject property. The information contained in this Marketing Brochure has been obtained from sources we believe to be reliable;
however, Marcus & Millichap has not verified, and will not verify, any of the information contained herein, nor has Marcus & Millichap conducted any investigation regarding these matters
and makes no warranty or representation whatsoever regarding the accuracy or completeness of the information provided. All potential buyers must take appropriate measures to verify all of
the information set forth herein. Marcus & Millichap is a service mark of Marcus & Millichap Real Estate Investment Services, Inc. © 2018 Marcus & Millichap. All rights reserved.
Non-Endorsement NoticeMarcus & Millichap is not affiliated with, sponsored by, or endorsed by any commercial tenant or lessee identified in this marketing package. The presence of any corporation's logo or name
is not intended to indicate or imply affiliation with, or sponsorship or endorsement by, said corporation of Marcus & Millichap, its affiliates or subsidiaries, or any agent, product, service, or
commercial listing of Marcus & Millichap, and is solely included for the purpose of providing tenant lessee information about this listing to prospective customers.
ALL PROPERTY SHOWINGS ARE BY APPOINTMENT ONLY.
PLEASE CONSULT YOUR MARCUS & MILLICHAP AGENT FOR MORE DETAILS.
STORAGE MAX
ACT ID ZAA0510332
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STORAGE MAX
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INVESTMENT
OVERVIEW
FINANCIAL ANALYSIS
STORAGE MAX
PRICING DETAIL
4
Storage Max Portfolio
OFFERING SUMMARY
▪ Total Units – 382
▪ Rentable Square Feet- 49,710
▪ Rentable Per Square Foot- $33.19
▪ Lot Size- 9.72 Acres
▪ 2019 Cap Rate- 9.17
▪ 2019 Cash-on-Cash Return- 16.37%
Warroad Overview
Marcus & Millichap is proud to have been chosenas the exclusive advisor and broker in regard to themarketing effort of the Storage Max Portfolio. TheStorage Max Portfolio offers a qualified investor theopportunity to enter into several small markets withinnorthern Minnesota and North Dakota.
The Portfolio consists of seven different siteswith 382 non-climate controlled units. With over 49,710total square feet and over 9 total acres this portfolioallows expansion opportunity at every site. The majorityof these units are newer built with high qualityconstruction, see below for more detailed constructioninformation. With new ownership this portfolio couldrealize a projected Cap Rate of 11.22% in year 1 and aCash-on-Cash return of 23.23%.
INVESTMENT OVERVIEW
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FINANCIAL ANALYSIS
STORAGE MAX
OPERATING STATEMENT
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FINANCIAL ANALYSIS
STORAGE MAX
NOTES
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STORAGE MAX
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INVESTMENT
OVERVIEW- Emerado Site
Emerado Site
OFFERING SUMMARY
▪ Total Units – 74
▪ Rentable Square Feet- 8,950
▪ Year Built- 2004
▪ Lot Size- 2.07 Acres
▪ American Building Systems- Metal Construction
Emerado Overview
Marcus & Milli
INVESTMENT OVERVIEW
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FINANCIAL ANALYSIS
STORAGE MAX
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RENT ROLL DETAILAs of December, 2019
STORAGE MAX
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INVESTMENT
OVERVIEW- Grafton Hwy 81 Site
FINANCIAL ANALYSIS
STORAGE MAX
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RENT ROLL DETAILAs of December, 2019
Grafton Hwy 81 Site
OFFERING SUMMARY
▪ Total Units – 86
▪ Rentable Square Feet- 12,710
▪ Year Built- 1979/1980/2000
▪ Lot Size- 2.25 Acres
▪ 1979/1980- Morton Building- Wood Construction
▪ 2000- American Building Systems- Metal Construction
Grafton Hwy 81 Overview
INVESTMENT OVERVIEW
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STORAGE MAX
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INVESTMENT
OVERVIEW- Grafton Downtown Site
Grafton Downtown
OFFERING SUMMARY
▪ Total Units – 59
▪ Rentable Square Feet- 5,750
▪ Year Built- 2006/2007
▪ Lot Size- 1.75
▪ American Building Systems- Metal Construction
Grafton DT Overview
Marcus & Milli
INVESTMENT OVERVIEW
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FINANCIAL ANALYSIS
STORAGE MAX
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RENT ROLL DETAILAs of December, 2019
STORAGE MAX
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INVESTMENT
OVERVIEW- Warroad Site
Warroad Site
OFFERING SUMMARY
▪ Total Units – 50
▪ Rentable Square Feet- 6,900
▪ Year Built- 1996
▪ Lot Size- 1.46 Acres
▪ American Building Systems- Metal Construction
Warroad Overview
INVESTMENT OVERVIEW
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FINANCIAL ANALYSIS
STORAGE MAX
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RENT ROLL DETAILAs of December, 2019
STORAGE MAX
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INVESTMENT
OVERVIEW- Hallock Site
Hallock Site
OFFERING SUMMARY
▪ Total Units – 43
▪ Rentable Square Feet- 5,700
▪ Year Built- 2004
▪ Lot Size- 0.9 Acres
▪ American Building Systems- Metal Construction
Hallock Overview
Marcus & Milli
INVESTMENT OVERVIEW
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FINANCIAL ANALYSIS
STORAGE MAX
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RENT ROLL DETAILAs of December, 2019
STORAGE MAX
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INVESTMENT
OVERVIEW- Cavalier Site
Cavalier Site
OFFERING SUMMARY
▪ Total Units – 26
▪ Rentable Square Feet- 3,000
▪ Year Built- 1994
▪ Lot Size- 1.0 Acres
▪ Trachte Building- Metal Construction
Cavalier Overview
Marcus & Milli
INVESTMENT OVERVIEW
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FINANCIAL ANALYSIS
STORAGE MAX
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RENT ROLL DETAILAs of December, 2019
STORAGE MAX
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INVESTMENT
OVERVIEW- Badger Site
Badger Site
OFFERING SUMMARY
▪ Total Units – 44
▪ Rentable Square Feet- 5,700
▪ Year Built- 2006
▪ Lot Size- 0.69
▪ American Building Systems- Metal Construction
Badger Overview
INVESTMENT OVERVIEW
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FINANCIAL ANALYSIS
STORAGE MAX
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RENT ROLL DETAILAs of December, 2019
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MARKET
COMPARABLES
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STORAGE MAX
RENT COMPARABLES MAP
STORAGE MAX
(SUBJECT)
Northwest Mini Storage
Grafton Stor-it
All Seasons Storage
4
7
8
9
11
20
12
14
15
16
17
13
18
10
1
2
3
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PROPERTY NAME
MARKETING TEAM
STORAGE MAX
RENT COMPARABLES
rentpropertyname1
rentpropertyaddress1
rentpropertyname1
rentpropertyaddress1
rentpropertyname1
rentpropertyaddress1
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OCCUPANCY: 64% | YEAR BUILT: 2004
Unit Type Units SF/Unit Rent/Unit Rent/SF
Total/Avg.
STORAGE MAX103 Minnkota Drive, Warroad, MN, 56763
YEAR BUILT: 2004
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Unit Type SF/Unit Rent/Unit Rent/SF
Non-C/C 5x10 50 $40.00 $0.80
Non-C/C 10x10 100 $50.00 $0.50
Non-C/C 10x15 150 $55.00 $0.37
Non-C/C 10x20 200 $100.00 $0.50
10x30 300 $110.00 $0.37
Total/Avg. 800
NORTHWEST MINI STORAGE1212 3rd St W, Thief River Falls, MN, 56701
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Unit Type SF/Unit Rent/Unit Rent/SF
Non-C/C 5x10 50 $45.00 $0.90
Non-C/C 10x10 100 $65.00 $0.65
Non-C/C 10x15 150 $75.00 $0.50
Non-C/C 10x25 250 $120.00 $0.48
Non-C/C 10x30 300 $150.00 $0.50
Total/Avg. 850
OCCUPANCY: 90% | YEAR BUILT: 2017
GRAFTON STOR-IT1205 W 9th St, Grafton, ND, 58237
PROPERTY NAME
MARKETING TEAM
STORAGE MAX
RENT COMPARABLES
rentpropertyname1
rentpropertyaddress1
rentpropertyname1
rentpropertyaddress1
rentpropertyname1
rentpropertyaddress1
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OCCUPANCY: 90% | YEAR BUILT: 1999
3
Unit Type SF/Unit Rent/Unit Rent/SF
Non-C/C 5x10 50 $35.00 $0.70
Non-C/C 10x10 100 $45.00 $0.45
Non-C/C 10x15 150 $60.00 $0.40
Non-C/C 10x20 200 $75.00 $0.38
Total/Avg. 500
ALL SEASONS STORAGE408 Moody Ave NE, Warroad, MN, 56763
STORAGE MAX
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MARKET
OVERVIEW
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Investors See Past Supply Hurdles to Strong Demand, Sustaining Sales Activity
Markets feel aftershocks of inventory growth. The self-storage construction pipeline has begun to contract following
seven years of expansion, although numerous deliveries are still underway. Several markets, including Raleigh and
Denver, have seen their inventories grow in excess of 40 percent so far this cycle. The added supply has placed
downward pressure on asking rents, with more operators offering concessions to lease units and maintain occupancy
levels. In other metros, such as Minneapolis-St. Paul and Phoenix, building is ramping up substantially in 2019, creating
potential headwinds for the future. Many smaller secondary and tertiary markets are also expanding inventories at a faster
pace this year. Overall building activity is moderating though, influenced by rising construction costs and tighter lending. In
some cases, developers are reducing expenses by converting other types of vacant property.
Demand keeps vacancy low. While the national vacancy rate was above 14 percent before 2011, the rate has generally
remained under 10 percent since 2015, despite the large amount of supply added over the past four years. Part of this is
due to an evolution in how owners engage customers. Operators have made greater use of digital advertising and online
portals to attract tenants, but they have also added conveniences such as automatic payment systems and 24-hour
access. Looking forward, self-storage properties are poised to benefit from the aging of both the millennial and baby
boomer generations. Members of the older cohort will be retiring and downsizing at the same time that many younger
people will be starting families, two scenarios that are likely to lead to a greater need for storage space.
Investors pursue opportunities, aware of construction trends. While supply pressures have weighed on property
fundamentals in many markets, positive demand trends and favorable yields keep buyers active. Although self-storage
cap rates have compressed in recent years, softening interest rates have widened margins. Initial returns can also exceed
those of other property types, further encouraging investment. Institutions are pursuing stabilized assets in the country’s
top metros, favoring areas with fewer completions. Private buyers continue to look for assets in the $2 million to $5 million
tranche, often in suburban settings or smaller cities.
Investors pursue opportunities, aware of construction
trends. While supply pressures have weighed on property
fundamentals in many markets, positive demand trends
and favorable yields keep buyers active. Although self-
storage cap rates have compressed in recent years,
softening interest rates have widened margins. Initial
returns can also exceed those of other property types,
further encouraging investment. Institutions are pursuing
stabilized assets in the country’s top metros, favoring areas
with fewer completions. Private buyers continue to look for
assets in the $2 million to $5 million tranche, often in
suburban settings or smaller cities.
2019 Self-Storage Outlook
60 Million
square feet
will be completed
6.4%
decrease
in non-climate-
controlled rents
10 basis point
increase
in vacancy
CONSTRUCTION:
Deliveries in 2019 will be
generously higher than 2018,
posting a 24 percent increase
year over year. This year will
be in line with the large
construction boom between
2015 and 2017.
RENT:
Average effective rent will
climb to $1,284 per month at
year end, setting a new high.
The average rent has soared
37 percent over the past five
years.
VACANCY:
Vacancy will decrease to 4.8
percent in 2019, the lowest
annual rate observed in the
current business cycle. Last
year, vacancy declined 80
basis points.
1.3%
increase
in total
employment
EMPLOYMENT:
Deliveries in 2019 will be
generously higher than 2018,
posting a 24 percent increase
year over year. This year will
be in line with the large
construction boom between
2015 and 2017.
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Regional Overview
West
• Vacancy: Availability in the West Region rose 50 basis points year over year at the end of the second quarter to
6.8 percent, moderating from the previous annual period when the vacancy rate increased 190 basis points.
• Rents: The average rent remained unchanged at $1.61 per square foot over the 12-month period ended in June
as growth in some California markets was offset by declining asking rates in Northwestern metros such as Seattle
and Portland.
• Prices: Self-storage properties in the West continue to demonstrate strong value appreciation. The average sale
price jumped 13 percent to $135 per square foot over the past annual period.
• Cap Rates: The West Region has some of the lowest cap rates in the country, with the regional average dipping
20 basis points to 6.0 percent in June.
Mountain
• Vacancy: The regional vacancy rate rose 20 basis points to 7.0 percent in June as availability widened in most of
the major Mountain metros. Operations remain tighter than the nation’s as a whole, reflecting positive
demographic trends.
• Rents: Rent growth was subdued across the Mountain states as the average asking rate held at $1.08 per square
foot for the third consecutive year in June. Las Vegas bucked the regional trend, with rents improving 5.9 percent
in that span.
• Prices: Improving property fundamentals in Salt Lake City and Las Vegas contributed to the largest year-over-
year sale price increase of any region. The average advanced 17 percent to $103 per square foot.
• Cap Rates: The average regional cap inched up 10 basis points to 6.4 percent at the end of the second quarter, in
line with the national average.
* Through June 2018
Sources: Marcus & Millichap Research Services;
CoStar Group, Inc.
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Texas/Oklahoma
• Vacancy: Operations across Texas and Oklahoma tightened over the past four quarters, with the regional
average down 20 basis points to 8.1 percent. A year ago, availability rose 30 basis points.
• Rents: Extensive construction across the region has dampened rent growth as operators reduce marketed rates
to encourage leasing. As a result, the average asking rent across the two states fell 3.2 percent to 92 cents per
square foot in the second quarter. That was an improvement over the previous 12-month period when monthly
payments dropped 5.9 percent.
• Prices: The average sale price appreciated 4.1 percent to $79 per square foot, but entry costs remain some of
the lowest in the country.
• Cap Rates: The two-state region maintained an average cap rate of 7.4 percent for the third year in a row, about
100 basis points above the national average. Initial returns exceed those of any other region.
Midwest
• Vacancy: Despite a 70-basis-point increase in the Midwest vacancy rate over the past 12 months, availability
remained the lowest of any region. The rate rested at 5.1 percent in June, 390 basis points under the U.S. level.
• Rents: Marketed rent stayed flat over the past four quarters at an average rate of 99 cents per square foot. Rents
are growing in Midwest markets with fewer completions such as Indianapolis and Cincinnati but they are
contracting in Chicago. In the previous annual period, monthly rates fell an average of 2.9 percent.
• Prices: The average sale price in the Midwest improved by 3.5 percent year over year to $80 per square foot, just
surpassing the average for Texas/Oklahoma.
• Cap Rates: The Midwest reports some of the highest initial yields in the country, with an average cap rate of 7.2
percent, unchanged from 12 months ago.
* Through June 2018
Sources: Marcus & Millichap Research Services;
CoStar Group, Inc.
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Northeast
• Vacancy: New supply pressures weighed on operations in the Northeast, raising the regionwide vacancy rate 70
basis points to 7.3 percent over the 12-month period ending in June. In 2018 availability moved up 20 basis
points.
• Rents: After advancing 1.9 percent over the previous annual period, asking rates dipped 0.6 percent during the
past four quarters to $1.59 per square foot. The Northeast nevertheless has some of the highest rents in the
country.
• Prices: Buyer demand lifted transaction velocity in the Northeast Region, contributing to a 13.8 percent jump in
the average sale price to $180 per square foot in June. Entry costs here are some of the highest in the U.S.
• Cap Rates: In conjunction with rising sales prices, the region’s average cap rate declined 20 basis points to 6.5
percent, roughly in line with the national metric.
* Through June 2018
Sources: Marcus & Millichap Research Services;
CoStar Group, Inc.
South
• Vacancy: Availability in the South rose by a wider margin than in any other region between the second quarter of
2018 and second quarter of 2019, increasing by 110 basis points to 7.5 percent.
• Rents: Substantial development activity in the region has added downward pressure to marketed rents, especially
among the larger Florida and Carolina markets as well as in Nashville. The regional average rate declined 1.8
percent to $1.11 per square foot year over year in June.
• Prices: Transaction prices improved for the eighth consecutive year as the average sale price appreciated by
11.6 percent to $93 per square foot. Lower entry costs compared with the Northeast, West and Midwest regions
and favorable long-term demographic trends drove investor interest.
• Cap Rates: The region’s average cap rate dipped 10 basis points to 7.0 percent in June. Initial returns have
averaged in the low-7 percent zone since 2015.
STORAGE MAX
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Capital Markets
Fed trying to extend economic runway but hitting headwinds. The Federal Reserve’s decisive action, including
its rate drop in July, will support the economic growth cycle but may be outweighed by the escalating trade war.
Uncertainty and caution increased following the Aug. 1 announcement that additional tariffs would be levied, sparking
a flight to safety and the recent inversion of the 10-year and two-year Treasurys. Though the Fed’s 25-basis-point
reduction of the overnight rate and early end to quantitative tightening could pose some inflationary risk, the Fed has
communicated a willingness to let the economy “run hot” in an effort to spur growth. Should core inflation rise above 2
percent, it will not be seen as an immediate risk. Falling interest rates, a byproduct of the trade war and the Fed’s
efforts to boost the economy, will bolster leveraged yields for investors by a small degree as lenders also look to
widen spreads. With the yield on the 10-year Treasury now down 70 basis points from the cycle peak last October
and recently touching its lowest level since the record low set in 2016, investment options that may not have penciled
even in the second quarter may now be feasible. This should help moderate the buyer/seller expectation gap that
widened earlier in the year.
Accessible liquidity balances conservative underwriting. Liquidity in the lending market remains readily available
for self-storage assets, with a wide range of local, regional and national banks; insurance companies; and CMBS
sources still active. Many of these organizations have mildly reduced or maintained lending rates in response to the
falling interest rate climate, with some instituting rate floors. While market forces are allowing assets to be readily
financed, softened property fundamentals have increased lender caution, particularly for non-stabilized assets.
Fluctuations in rental rates have made it difficult for some investors to estimate income growth for recently opened
facilities. Conversely, lending for stabilized properties in good locations remains plentiful, underpinned by favorable
storage demand metrics that include both pro- and counter-cyclical drivers such as employment growth and elevated
divorce rates.
* Treasury rate as of Aug. 12; Cap rate through 2Q
** Year-to-date as of Aug. 12
Sources: Marcus & Millichap Research Services; CoStar Group, Inc.; Real
Capital Analytics; Federal Reserve Bank of St. Louis
