The Biggest Mullet in the History of the Planet - part 1

I was working for an apartment REIT when I started hunting for potential self-storage development sites as a side hustle. At one point we were pitched a multifamily project in Destin, which caused me to glance at the storage market there. I noticed that storage rents on the “inland” side of the bay were extremely high.

Once I became a full-time storage guy, I started searching harder in that area, called Niceville. Where were the busiest roads, the highest incomes/housing values… and where was there a “donut hole” where there was no self-storage?

The retail corridor on the east side of town was it. But almost nothing was officially for sale, as that area had been pretty thoroughly developed. There were a couple parcels owned by the established Ruckel family, but they were “never-sellers”; they only wanted to ground lease.

This wasn’t thrilling news but it was a good enough spot that I started the conversation. I had been introduced to a sophisticated equity group in Atlanta who were at least open to the ground lease idea, as they owned the Hampton Inn down the street. I cold-called a variety of storage industry folks, and while nobody was psyched about ground-leasing, nobody said it was idiotic either. Especially considering this was across from a Chick-fil-A/Walmart/Starbucks.

I couldn’t shake the desire to find a '“fee simple” location (would’ve been easier to capitalize), so I revisited the zoning map and the GIS map. Somehow, there was a 2-acre site that had the proper commercial zoning but was just sitting there, not for sale, owned by a 92-year old man. I crunched the numbers, dropped a letter in the mail offering $1.5m, forgot about it and kept the conversation going with the Ruckels.

Lo and behold, the call came in - the 92-year old man’s son said, “that works.” Immediate fist-pumping on my end of the line.

I got him a proper LOI and got the attorney who closed my very small first-ever commercial real estate deal (a $30,000 purchase) to help me draft the PSA. Looking back it was 120 days due diligence + 60-day close, which was laughably short compared to what happened.

I did some typical due diligence (geotech etc) and cold-called an engineer in the area for a site plan and a proposal covering the whole civil engineering scope for a multistory self-storage facility on this 2-acre piece.

Given the obvious fundamentals at play, I wanted to go “big,” which for me at the time was anything over 60,000 rentable square feet, but I didn’t have the balls to go much bigger than that, and I had probably been advised by some conservative friends in the industry to be careful in these smaller markets. The layout above got me there, and then some.

I finally got to a point during the land contract where I was introduced to a stout capital partner who committed to this and other projects (!!). They asked me to bring on a 3rd-party owners rep/construction manager. I asked everyone and turned over many rocks, but nobody could beat the price offered by the project mgmt team at Franklin Street; plus they were energetic and interested.

That project manager introduced me to a contractor I would’ve never found on my own - a GC who, to this day, does not have a website (in fact, when you google them, the address is a house in a subdivision and it says “Permanently Closed”). But they had tons of storage experience, building for big players I knew. I liked them immediately.

After I had already gotten pretty deep into design, my newfound capital partner on the project told me to get a feasibility study, and that study said there was a 188,000 SF shortfall in a 2.5 mile ring.

I joked with my partner that I should’ve gone four stories instead of three, but it was just a joke - and it’s a damn good thing I didn’t, as I’ll explain later.

[to be continued]