Self Storage - Your next investment?

Begun as a niche of multifamily, self-storage has developed its own identity as a highly profitable investment. While many mom-and-pop businesses still operate in the self-storage arena, real estate investment trusts and institutional investors from universities to pension funds to the Blackstone Group are snatching up multiple deals in self-storage facilities, usually for the high end, larger facilities in urban centers. 

For example, in December 2015, Storage Pros Management sold 37 properties for $242.5 million to a joint venture led by an institutional investment rm. In another mega-deal, Morningstar Properties and Harrison Street Real Estate Capital sold 43 of its self-storage facilities for $315 million to the self-storage REIT Public Storage in October 2013. Annually, $2 billion of transactions in self-storage take place. 


“Self-storage is the best performing sector of commercial real estate,” says C. William Barnhill, CCIM, owner of Omega Properties in Mobile, Ala. “Whether a CCIM is involved in brokering, building, managing, or owning self-storage facilities, it’s a great business.” 

Since he entered the self-storage marketplace in 1993, Barnhill has managed, brokered, and sold these facilities. Currently, he owns about 3,500 units in the Mobile area and manages the brokerage for self-storage facilities in Alabama, Mississippi, and the panhandle of Florida. 

Evolving Marketplace 
Self-storage has returned 101 percent to investors from early 2008 to 2011, outperforming all other REIT categories, according to data compiled by Bloomberg. Every year at least 11 million people in the U.S. stash some of their possessions into storage units. 

“People own a lot of things and inherit things that they don’t want to lose,” Barnhill says. “ rough the years, we have had both population growth and more people learning how to use storage.” 

For instance, major life events o en involve greater demand for self-storage, such as birth, death, marriage, divorce, building a home, renovating a home, or downsizing a home. 

“ The self-storage market is constructed like a pyramid with mom-and-pop owners of one to five properties at the bottom half and the top 12 percent is owned by REITs,” says William Brown field, CCIM, CRE, of Brown field & Associates, LLC, in Houston. “In the middle, regional players are building new properties and buying the best mom and-pop properties. They fi x up the properties, standardize them, and may eventually sell them to REITs.” As storage has evolved, many of the facilities have changed from bare-bones, concrete and corrugated aluminum shells into more attractive, climate-controlled facilities with LED lighting, which blend into good neighborhoods and off er tenant insurance.

NAI Norwood Group is part of the Argus Self Storage Network. Joe Mendola, Senior Advisor, has spent the last two decades immersed in this type of real estate. He would be happy to answer your questions, help you locate an investment, or assist you in divesting assets in your current portfolio.  

For the full article or more information please contact our offices at: 603-668-7000 or 603-431-3001 or visit us at www.nainorwoodgroup.com. 

Content provided by Sara S. Patterson is executive editor of Commercial Investment Real Estate.

Matthew Bacon Joins NAI Norwood Group

Bedford NH – NAI Norwood Group is pleased to welcome Matthew Bacon to the Bedford team. Matthew’s primary focus is investment property sales and commercial leasing in southern and central New Hampshire. Matt comes to NAI Norwood Group with a residential and multifamily investment real estate background. He is looking forward to making the switch to full time commercial real estate.

Matthew graduated Cum Laude with Honor’s Scholar distinction, elected to Psi Chi from Eastern Nazarene College in 2006.  He is enrolled in the MBA program at Southern New Hampshire University, and is a member of The National Society of Leadership and Success.  Matthew also serves on the NH Association of Realtors Public Policy Committee as well as the Communications Committee.

Outside of the business world, Matthew serves on the Board of Trustees for Fellowship Housing Opportunities, Inc in Concord, NH.  He is a past Big Brother, and 2010-11 member of the Easter Seals Veterans Count Club.  He is also active in several area networking groups, and is a former member of the Concord Young Professionals Network Social Committee.  Matthew also attends Manchester Young Professionals and Job Creators Network events regularly.

We are looking forward to working with Matthew as he continues his career by providing the services needed for his clients to succeed.

NAI Norwood Group is an affiliate of NAI Global, the world’s leading managed network of independently owned commercial real estate brokerage firms.  Through this network of 355 offices in 55 countries, NAI Norwood Group is able to leverage their 45+ years of dedicated local experience around the world. With our extensive background and strong local contacts, we are able to assist individual corporations in negotiating leases, sales, business brokerage, investments, relocation, site selection and development. For more information please visit www.nainorwoodgroup.com. Or contact one of our offices: 116 South River Road, Bedford, NH 03110, (603) 668-7000 or 28 Deer Street Suite 301, Portsmouth, NH 03801 (603) 431-3001.

NAI Norwood Group Sells Arrow Self Storage

LONDONDERRY NH – NAI Norwood Group is pleased to announce the sale of Arrow Self Storage in Londonderry, NH. The sale closed on September 27, 2014 in the amount of $2,000,000 according to the registry of deeds. Joseph Mendola, of NAI Norwood Group, represented the seller and assisted the buyer in this transaction. Mendola is the New England representative for the Argus Self Storage Sales Network. Argus is a national marketing organization that specializes in the marketing and sale of self-storage facilities across the country.

This self-storage facility is strategically located on RT. 102 in the heart of the Londonderry retail district. The buyer is a portfolio developer/operator of self-storage facilities in NH. The buyer is spending a significant amount on capital improvements bringing project up to current standards.

NAI Norwood Group is an affiliate of NAI Global, the world’s leading managed network of independently owned commercial real estate brokerage firms.  Through this network of 355 offices in 55 countries, NAI Norwood Group is able to leverage their 45+ years of dedicated local experience around the world. With our extensive background and strong local contacts, we are able to assist individual corporations in negotiating leases, sales, business brokerage, investments, relocation, site selection and development. For more information please visit www.nainorwoodgroup.com. Or contact one of our offices: 116 South River Road, Bedford, NH 03110, (603) 668-7000 or 28 Deer Street Suite 301, Portsmouth, NH 03801 (603) 431-3001.

Best markets to become a landlord | Project Economy - WMUR Home

There are so many articles floating around the state in regards to the real estate market today. Go to just about any news website and you'll find that it's another all time low for mortgage rates or the best place to pick up foreclosures. I hadn't come across this one in a while. Is it time to become a landlord? According to this article it just might be.

Best markets to become a landlord | Project Economy - WMUR Home

Search here to find our current multi-family listings. Your next investment could be just around the corner.

NAI Norwood Group
www.nainorwoodgroup.com

NAI Norwood Group Represents Buyer in a 1031 Tax Deferred Exchange

Peterborough NH – Andy Fleisher, CCIM, of NAI Norwood Group, represented the buyer in this sale of investment real estate, as part of a 1031 Tax Deferred Exchange.  Bradley Vear, CCIM, SIOR, of Vear Commercial Properties, Inc. represented the seller, 125 Kublin Road, LLC, of East Moriches, NY.  John Bosen, attorney for Bosen & Associates, P.L.L.C., of Portsmouth, NH, assisted the buyer with this 1031 Exchange.

The sale was for a ground lease to a CVS Pharmacy, located at 125 Dublin Road in Peterborough, NH, adjacent to a Shaw's Grocery Store.  This location at Dublin Road is also known as the Peterborough Bypass, and NH State Route 101. The sale price was $2,985,000.  The property was built in 2008, and consists of 1.97 acres of land improved with a 13,167 square foot drugstore, with prescription drive-thru.  Andrew Fleisher, CCIM, is an investment real estate specialist with NAI Norwood Group, with offices in Portsmouth and Bedford, NH.  Also assisting in the sale was Michael Yuras, CCIM, of Cornish & Carey Commercial Newmark Knight Frank, based in San Mateo, CA.

NAI Norwood Group is an affiliate of NAI Global, the world’s leading managed network of independently owned commercial real estate brokerage firms.  Through this network of 355 offices in 55 countries, NAI Norwood Group is able to leverage their 40+ years of dedicated local experience around the world. With our extensive background and strong local contacts, we are able to assist individual corporations in negotiating leases, sales, business brokerage, investments, relocation, site selection and development. For more information please visit www.nainorwoodgroup.com. Or contact one of our offices: 116 South River Road, Bedford, NH 03110, (603)668-7000 or 100 Market Street Suite 200, Portsmouth, NH 03801 (603) 431-3001.

Taxation and Real Estate Investment: Net Investment Income Tax

Written by Chris Norwood, NAI Norwood Group

We have all heard the bit about Death and Taxes. However a closer look into the tax code will reveal an interesting new tax that has been enacted in 2013. This new tax, on investment income, is often misunderstood as a result of it being misrepresented and also as a result of that it is downright confusing.  So here is a quick glance at what the new tax is and what it is not.

Net Investment Income Tax (NIIT):

IS NOT… a transfer tax – while you may end up paying the tax as a result of selling a property, it does not come out of the sales proceeds at the time of transfer.

IS NOT… just for real estate – all investment that you collect passively could be subject to this tax (rents, capital gains, stocks etc).

So what is the NIIT and what is taxable? The net investment income broadly speaking is a tax on passive income in the amount of 3.8%. However there are many thresholds and other factors.

Here is where it becomes a bit tricky to find out exactly how much of your income is subject to the tax. Using the words of the IRS, “The NIIT applies at a rate of 3.8 percent to certain net investment income of individuals, estates and trusts that have income above the statutory threshold amounts.” A table of all of the threshold amounts can be found: http://www.irs.gov/uac/Newsroom/Net-Investment-Income-Tax-FAQs.

What becomes taxable is the lesser of the amount of income over your threshold amount OR your Net Investment Income. Again quoting the IRS:

Taxpayer, a single filer, has $180,000 of wages. Taxpayer also received $90,000 from a passive partnership interest, which is considered Net Investment Income. Taxpayer’s modified adjusted gross income is $270,000.

Taxpayer’s modified adjusted gross income exceeds the threshold of $200,000 for single taxpayers by $70,000. Taxpayer’s Net Investment Income is $90,000.

The Net Investment Income Tax is based on the lesser of $70,000 (the amount that Taxpayer’s modified adjusted gross income exceeds the $200,000 threshold) or $90,000 (Taxpayer’s Net Investment Income). Taxpayer owes NIIT of $2,660 ($70,000 x 3.8%).

Logistics of the law aside, where this can really come into play are one time large gains yielded form the sale of a building. For investors with smaller portfolios and personal income well below the threshold amounts, this may not affect them; however for investors selling a property with a low basis, the tax could be triggered.

It is important that all investors talk with their accountants prior to selling a property to understand the tax ramifications. However we advise you also to discuss with your accountants the tax liabilities from you passive rents as well to understand the full effects this tax may carry.

NAI Norwood Group Welcomes Mark Dickey

If you are looking to find Affinitycire.com, LMCIR.com, MarkDickey.com, TheNHcommercial.com or TheNEcommercial.com, we are pleased to announce that the new home for these destinations is www.nainorwoodgroup.com. If you would like to connect with Mark Dickey please email mdickey@nainorwoodgroup.com. If you would like to visit our database of commercial listings CLICK HERE. If you would like to join our monthly real estate information release please CLICK HERE. 

Bedford NH – NAI Norwood Group is pleased to announce the addition of Mark Dickey as an Investment and Commercial Sales broker.

Mark Dickey has been practicing real estate for over 15 years, with his major focus being on Multifamily and Apartment income properties. Mark began his real estate broker career in 1998, representing investors, sellers and buyers in both New Hampshire and Massachusetts, where he primarily focused on investment real estate.  He quickly became a full-service real estate investment broker specializing in the Multi-family / Apartment sectors. Since he began in the industry Mark has sold hundreds of units valued at over $20 million dollars.  Along with the multi family focus, Mark has worked in the mixed use and leasing sectors which has broadened his client services to expand to consulting, marketing, research and strategic planning for all of his clients.  His approach is to work with the team at NAI Norwood Group to use draw upon this past experience to improve client’s bottom line and efficiency. Welcome aboard, Mark!

NAI Norwood Group is an affiliate of NAI Global, the world’s leading managed network of independently owned commercial real estate brokerage firms.  Through this network of 355 offices in 55 countries, NAI Norwood Group is able to leverage their 40+ years of dedicated local experience around the world. With our extensive background and strong local contacts, we are able to assist individual corporations in negotiating leases, sales, business brokerage, investments, relocation, site selection and development. For more information please visit www.nainorwoodgroup.com. Or contact one of our offices: 116 South River Road, Bedford, NH 03110, (603)668-7000 or 100 Market Street Suite 200, Portsmouth, NH 03801 (603) 431-3001.

Commercial Foreclosures 2012 Update

Written by Chris Norwood, NAI Norwood Group

In November of 2011, there was a four year dip in the total number of foreclosures in the US. In January of this year, real estate research firm Realty Trac forecasted that 2012 would be a big year for foreclosures across the nation. They cited fourth quarter 2011 process delays as well as the “robo signing” scandal of possible reasons why properties that should have been foreclosed on in 2011, would be closed in this year. Here we are wrapping up 2012 and we must ask: what is taking place with foreclosures and what is going on in commercial foreclosures?

Let us begin with the New Hampshire macro foreclosure market. Do you remember those days, when no one worried about that word. In 2004, the foreclosure rate (Total number of foreclosure deed transfers divided by total transfers), was at a 17 year low. Less than one percent of all deed transfers in the state were through a foreclosure. Foreclosures continued to rise breaking the 10% barrier in 2008 and peaking in 2010 at over 16%. That is one out of every six real estate transfers. A large number.

Since that time foreclosure rates have been flat. 2011 clocked in just under 16% and 2012 looks to be about the same forecasted from the first 10 months of the year. In New Hampshire we have seen home sales begin to climb. In September of this year the New Hampshire Association of Realtors announced that they had seen eight double digit straight months of home sale increase month over month. In addition median home prices were leveling. So while foreclosures continue to remain in the forefront of real estate discussions, they are not increasing here in the Granite State.

On the commercial front, experts from across the nation are viewing things differently. While there are currently billions of dollars of outstanding debt across the nation that may be considered “troubled” we need to place that in context. In a residential foreclosure process, when a homeowner falls behind on payments, the long process has begun a foreclosure. Along the way there are many options to avoid that pitfall such as short sales. In the end when a short sale or foreclosure happens the result is the current occupant probably vacates. In the commercial process much of the troubled debt in the market is underwritten on projects that are leased as investment properties to other tenants. This is important because the underlying asset still may have cash flow and may have value. As a result commercial property tends to be less likely to foreclose as it is to have the note sold or to have another investor come and pick it up.

This is not to say that commercial foreclosures cannot happen.  Historically, commercial real estate trends 12-24 months behind residential. In 2008 all foreclosures in the state were around 14% but commercial properties were being foreclosed less than 9%. The following year, commercial was back on par with the rest of properties at 14%, a 12 month lag.  However, in New Hampshire we have then bucked that tend. Since 2010 the commercial foreclosure rate has been falling and this year it is projected to end somewhere back around that 9%, despite the statewide rate being around 16%.

Forecasting from here is not easy; however the decrease in foreclosures in commercial property is probably more attributed to the improved job numbers and the fact that the health of New Hampshire is strong. Large properties with syndicated debt still may be in trouble, but local lenders are doing what they can to work with property owners who are in trouble.  While there are outside factors such as the “Fiscal Cliff” that loops for our federal delegation, the local prospect seems positive.  We see a marginal lowering of the foreclosure rate for all property in New Hampshire for next year. 

IT IS THE BEST TIME TO BUY SELF STORAGE

Self storage has sometimes been called recession proof. I am not sure about that. But I do know that it is recession resistant. By this I mean that in good economies people store for positive reasons. That is, people store because they have more things to store like snow mobiles, 4 wheelers, boats and classic cars etc. During downturns people store for less positive reasons like scaling down from a house to an apartment and they hold on to things in hopes that the economy rebounds. Or families consolidate so some things that are important to them have to be put in storage.

As far as self storage becoming recession proof, I do not see any indication that that is the case. A benchmark that I found useful is that if warehouse space reaches a vacancy rate of greater than 10% and the unemployment rate exceeds 10%, this vacant space will put pressure on self storage, like it did in the 1991 recession and vacancies in self storage will increase beyond normal levels. This is due to the fact that landlords of warehouse space will start leasing out space to smaller and smaller storage uses at very low rents.

Since I do not see the New England economy getting to that vacancy level in most areas, the financing climate has made self storage a compelling investment right here and right now. By this I mean that, for an investor with good credit scores, banks are very willing to lend to self storage operators for all of the reasons I noted above. One can borrow with very favorable terms with an interest rate of 6% or less. In addition, the Small Business Administration has expanded its borrowing activities to self storage. This is a new and very positive development for the self storage industry.

The most important reasons for investing in self storage is because this recession resistant investment class will perform better in an inflationary period and an investor will be able to pay back the loan with dollars that will be worth less in buying power as the value of hard assets rise exponentially in inflationary times. Also, if one can lock in these low interest rates now, one can avoid borrowing at higher inflationary rates if they do not wait until inflation comes before making an investment in real estate. This borrowing opportunity adds to the positive cash flow of self storage. Lastly, the equity that is being built up tax deferred due to the pay down of the mortgage over time adds to the total return for this fine investment class.

The other reason why self storage is a good buy now is that many investors are fearful of another downturn in the economy. So the competition for buying investments now is very low. And, if you will make an offer on self storage, you will find out the lowest price the seller is willing to take. Some believe that self storage is a distressed asset class, but this is not the case, because occupancies are very good in most markets in New England. So, even if you are the only offeror, you cannot buy self storage in New England at a deep discount like you can in areas like Florida and Nevada. In the words of the astute investor Warren Buffet, “Buy when everyone is scared and sell when everyone is giddy”. If you accept the wisdom of Mr. Buffet then now is the time to buy.

I have been a real estate broker through 5 recessions. I started with the oil embargo of 1973 when you could only buy $2 worth of gas at a time. In closing I will ask you the same question I ask all of my clients. Which one of those 5 recessions did not turn out better after it was over? The answer is none or I would not be writing this article to you about investing in real estate. The comeback is, yes Joe, but this recession is different. After short laugh, I remind that person that in 1991 there were no banks in New England to lend to anyone. The market was controlled by the FDIC. Today we have wonderful banking opportunities for creditworthy borrowers. This recession is only different in that it is not nearly as bad as the others. However, inflation is coming soon. Those investors who buy hard assets with good cash flows will increase their wealth significantly in the coming years.

Written by Joe Mendola, NAI Norwood Group, joe@nainorwoodgroup.com