"In the Arena" - Part 2

I previously wrote a little about a couple deals I had tied up with various partners here.

The purchase and sale agreement we signed for the drive-up facility with room to expand in Rowan County, NC required permits as a closing condition.

Shocker: permitting took forever. We went under contract March 14^th and didn’t close until July 29^th . The main holdup was that we wanted to add a leasing office to this previously-unmanned facility and sewer was nowhere nearby, so the toilet needed to be septic. This county stupidly requires that your septic be the type of septic tank that leaches into the ground, which means the soil has to percolate “the right way.” And if it doesn’t, they can say no. Well, they fucking said no. 

We decided we’ll try again by getting creative with the location of the septic, but the seller’s partner was completely losing his mind at this point waiting for us to close, so everyone agreed to close for now and figure that out later, knowing that this will take months to conclude.

The property management company we found for this little drive-up facility seems perfect so far. He does a lot of remote/unmanned facilities but fully believes this facility will “take off” once we have a leasing office, which we will. 

He didn’t provide a fancy projection like what you would get from Cubesmart, his team is not huge, but he crushed it at takeover – and I know because I was copied on the endless texting between him and the seller trying to get everything quickly transferred over. 

The marketing steps taken while under contract, such as the seller’s gracious willingness to slash his rents (written about previously), paid off: by the time we closed, the place was 67% full.

I’m really proud of this one. I didn’t give up any of the GP (or have to go through a 3rd-party broker) to get to the debt or the equity or even the asset itself, which I sourced directly from the seller. Also, with this one underway, we are now under construction on multiple facilities at once, which makes me feel it’s 2021 again (it’s not, but this is fun).

Similarly, the contract timeline for my first-ever industrial acquisition took much longer than the seller wanted.

Our 60-day contract gave us the right to extend once, for 30 days, if we needed more time to get this thing into the Brownfield program (discussed in previous post). Which we did, and we ended up using every bit of that three-month period.

It actually wasn’t the Brownfield program that took longer than expected; it was that we dicked around for an extra couple weeks after getting the unofficial “thumbs up” we needed from the DES. The bank hadn’t started on loan docs even though they had told us the loan was approved and despite my repeatedly asking. My partner was pissed enough that we almost closed all cash with the intent of dumping the bank for another lender post-closing. But the bank made it to the finish line.

The cost of this Brownfield process is about $39,500 and doesn’t consist of any remediation, just borings and wells and a promise not to fuck up the property going forward.

We are also spending $29,000 on a new paint job and $10,000 on gravel and cutting down weeds in the non-paved section of the property – which, by the way, is attractive to prospective tenants, as a “drop yard” in such a dense, growing area is a valuable thing.

Most of the building is a 13,500 sf body shop that is still paying but wants out; we already have a prospect, a DTC manufacturer, wanting to pay $15/NNN for that space. Fifteen hundred sf of that space can be very easily re-demised to be its own flex suite, so we will do that and charge significantly more for that space. And the other 1500 sf tenant will “roll” soon as well, to a much higher rate.

I like to say that I will always have a storage deal going on here or there at any given point, no matter what else I do. But I am psyched about the possibility of doing more small industrial projects.