Converting big box retail buildings to Class A climate controlled self storage

[Clint Harris]

Investment Info:

Other commercial investment investment.

My partners and I have purchase 2 KMarts, 4 warehouses, 2 mills, and a grocery store that have been converted to Class A Climate Controlled self storage facilities across the southeast, currently $160 million in assets under management at stabilization. Commercial and asset class conversion are the way, no more AirBNBs for me.

Typical deal is to buy a property for $2-3 million, put $1-2 million into it, all in for $3-5 million, stabilized asset is worth $13-17 million.

What made you interested in investing in this type of deal?

Asset class conversion creates an opportunity for Massive value-add, creating enough value for a cashout refi, allowing for millions to be taken out without a sale, which means no Capital Gain, which means no taxes. We keep the asset and allow it to continue to cash flow. It's a BRRRR on a massive scale.

How did you find this deal and how did you negotiate it?

Off market KMart was the first one, empty for a decade, purchase price $1.5 million, replacement cost just for the brick and mortar shell was $6.5 million.

How did you finance this deal?

Raised capital from a small group of investors as a 506(b) syndication

How did you add value to the deal?

In-house construction, converted an 87,000 sf vacant KMart to Class A climate controlled self storage in Reidsville, NC, then 8 more projects

What was the outcome?

$160 million in stabilized AUM.

Lessons learned? Challenges?

Asset class conversion combined with capital raising and syndication, vertical integration, and in-house construction is the way.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

We have a team that we love