In February 2020, The Feldman Companies launched an offering for a to-be-redeveloped, 104,673 net rentable square foot, Class A, Extra Space self-storage facility located in Northeast Philadelphia, PA.
At the time of the offering, The Feldman Companies was under contract to acquire a 152,000 square foot vacant box that was most recently occupied by Walmart with the intention to convert it into a state-of-the-art climate-controlled self-storage facility. The project was zoned for self-storage “as of right”, use permits had already been received, and construction documents had been filed. Accordingly, The Feldman Companies believed the project to be an ideal retrofit as opposed to a ground-up development project. Additionally, it had also worked closely with Extra Space Storage to value engineer the building design, site layout, and rent rates for Liberty Storage with the goal of increasing its return on investment.
The business plan contemplated a storage facility constructed with modern features such as advanced management software, security, lighting, access, climate control, and conveniences typically associated with modern storage facilities. The facility would have a covered internal driveway with sufficient parking and loading to accommodate tenants during inclement weather, a superior feature compared to market competitors. The Feldman Companies had proposed a unit size and mix in accordance with the existing market demand and assumed leasing up approximately 26% per year through 3.5 years, targeting project stabilization at 91%. Lease-up was projected to begin after a 6-month construction period.
Despite the city of Philadelphia being shut down in early Q2 2020 as a result of the COVID-19 pandemic, the general contractor was able to continue interior work throughout the closure and The Feldman Companies coordinated with the contractor and suppliers accordingly to minimize any delay to the project’s planned schedule. By the beginning of May, when Philadelphia allowed construction to resume, construction progress already included completed demolition of the mezzanine deck, 50% of the drywall installation, interior painting, rough coarse sanding of the ground floor concrete, and more.
Overall, the project continued to progress, suffering a minor setback in August when Hurricane Isaias caused some damage to the newly installed air conditioning units and the roof. However, The Feldman Companies was fast to react with an insurance claim, which allowed it to receive the insurance proceeds and address the roof and HVAC repairs in a timely manner. By mid-October, construction was beginning to approach substantial completion, and a certificate of occupancy was expected to be received in either mid or late December.
Throughout the construction duration, the asset received significant attention from potential purchasers. At the end of 2020, The Feldman Companies announced that it had received and accepted an attractive offer from a strong national buyer. The sale transaction was officially completed in late January 2021, capturing “early value creation” for investors.
The high-quality nature of the asset and The Feldman Companies’ successful construction plan execution led to an opportunistic exit opportunity early in the investment life cycle, achieving favorable returns for investors, including a higher-than-projected IRR.
*Net of the most onerous fees charged to clients of CrowdStreet Advisors, LLC, our registered investment advisor subsidiary; an investor’s actual returns on a realized investment may differ.
This report contains explanations of a series of events associated with the Liberty Self Storage offering that resulted in an approximate 76.5% (net of most onerous fees) IRR to investors (including those from the CrowdStreet Marketplace). Certain aspects of the report such as dates of major events and the final outcome are easily verifiable while others, particularly underlying reasons behind the sponsor’s business plan execution, are not.
The report partially relies upon the sponsor’s explanations, the information contained within sponsor-produced quarterly reports, and conference calls. This analysis is not an assertion of independently verified facts but, rather, is for informational purposes only, to convey CrowdStreet’s understanding of what transpired.
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