The Biggest Mullet in the History of the Planet - part 2

It was time to get the actual building designed. My capital partner was telling me they’d help with predevelopment costs, but I couldn’t get an answer on how to structure that, so I just YOLO’d a bunch of architectural spending and assumed we’d figure it out.

I did some math on how far a customer would have to push their shit and sketched out my desired entrance locations.

In the meantime, I was leaning toward hiring LifeStorage, which was a big REIT out of NY, to manage the facility after construction. I was teeing up Absolute Storage Management to run my others, but this one seemed hard to screw up. I was told not to hire a REIT unless a monkey could run it, and I believed a monkey could lease this thing up.

My contractor had enough information to ballpark the cost:

Which I found to be amazing. I’d been quoted 18% more by a bigger firm, and my 1st draft model assumed 33% more because I’d padded it so much.

This assumed a VERY boring metal building. My partner asked to spruce it up a little with some EIFS, and I asked him if we could get a mural done after completion assuming there was still money left.

My project manager had recently pointed out that this letterhead mentioned a mullet festival.

It was decided. We would do a massive mullet mural on the building. I found a mural guy and got a proposal:

At some point, it was time to think about the construction loan. A “co-GP” of mine had tons of capital placement experience from his time at a large brokerage, and a young loan officer he trusted at Valley Bank told us he could get this done, with great confidence. A couple weeks went by and his credit folks got back to him and said this project looked like it could end up as an “abortion.”

This was a project that storage industry folks were practically begging to be involved in, and my capital partner would bring a net worth 20x the loan amount as a repayment guarantor, but this just shows you how finicky banks can be. They said you’ve got a sponsor in GA, a project in FL, and a guarantor in the midwest. Maybe they also figured out that I had never built anything before, who knows.

This was starting to get really stressful. I had gotten this capital partner to take down a couple sites thus far without debt in place, but their general counsel said “enough,” maybe because it was $1.5m for 2 acres. She wanted at least a term sheet from a bank before closing on dirt.

The land seller, who by the time this was all over would be nice enough to grant multiple extensions for free, was a well-connected, well-known local businessman with a long history in the area and wanted to help. He pushed me to talk to his branch manager at Synovus, and apparently that relationship meant something because they ended up doing the deal.

We got our final budget for the project (which went up a little due to the added EIFS exterior, and probably some other reasons), closed on the site, and started construction.

And btw, we did a swap on the $5.8m construction loan and ended up at a rate in the high 2s. LFG!!

Construction went alright. Three issues came to mind which ended up being relatively minor:
1. as we graded the site, a major water line started losing the support of a certain embankment of dirt that was wearing away, so we had to build this big temporary “seawall” that wasn’t budgeted for
2. utility lines by the road were not as deep in the ground as the surveyor thought, so we couldn’t build the driveway where we planned
3. the detention pond was not designed properly, resulting in a bunch of “wash-out” that upset the city. We had to redesign it and do additional sitework.

But overall, we used minimal amounts of our construction contingency, and once we finished and passed our inspections, it was time to paint what the muralist and I agreed was likely the largest mullet in the world.

Our first ~6 months of operations we got ~200 move-ins and were charging $1.80 rents. I was getting unsolicited offers from pretty big operators. And I was rich on paper, or so I thought.

[to be continued]