Location: Shelley, ID
For Sale Website:
This is a storage unit company in the growing eastern Idaho town of Shelley. The current asking price is $1.35 million. Zion’s Bank will only accept a loan if you pay at least 30% down, and the current model has a 40% down payment to get the lower interest rate of 5.05%. The forecast has been pulled out to 2030, which is the last few years of the loan of 20 years.
The WACC was figured out with some betas from REITS of storage units and have been adapted to this particular storage unit. The projected return using WACC should be 5.71% according to the REITS beta.
We used the average occupancy thus far of the property of 80%. Marketing is a fixed percent of sales; G&A Expenses would be the money that you take out from the company or salary of the manager of the units. Utilities are an estimate of the electricity use for the security cameras and house on property. Depreciation is a straight line depreciation of 50 years.
The conclusion that we have come to as a team is that the asking price is too high for the property. We feel that in order to have an industry average return for the property, the price would have to be dropped even further than the two price drops to date the owners have done. The investment starts to make sense at the $1.1 million range. Until the average occupancy increases or there is a growth in the number of units, this commercial property should not be purchased.