Self Storage Loans

How has self-storage been affected by the pandemic?

Self-storage occupancy rentals have skyrocketed and this Commercial Real Estate asset outperforms every other Commercial asset class, including retail, office, hospitality and multi-family. Self-storage has economically benefited from recessions since the 1990s and tends to perform well whether in a bear market or a bull market. Dislocation, divorce, death, and disaster affect the demand for self-storage units due to families moving, downsizing, selling their homes, or storing their relative’s belongings, etc.

Which bank or financial institution is most favorable for lending on self-storage?

We at Trim Financial love stabilized self-storage units with 5 years or more of history. It is the most appealing asset types in the lending market and recently commands as favorable pricing as multifamily or office real estate assets. The stabilized rental history of self-storage units can outweigh location, as some banks can be taken aback on location and may not want to lend given the demographics. A proven lease track record of year-over-year rental stabilization can confince private lenders and brokers like Trim Financial to overlook the less favorable location.

Commercial Bankers are seeing many metro markets oversaturated with self-storage unit development, leading them to rely on feasibility studies that show the overall storage square foot per capita. The average Gross rental income across the country is ~7 sq ft/capita in a 3-mile radius. If commercial bankers see any more than that, they will use this metric to see how much storage is coming to the market. Overall, it is becoming harder to finance in oversaturated markets. One aspect that these studies do not reflect is whether the storage available in these markets are class A, climate-controlled, automated facilities, or older mom-and-pop facilities. Key-less, automated technology in these newer storage units are now expected by bankers on any new self-storage facility that is built and are in more demand now due to the ongoing Covid pandemic.

How are major commercial banks pricing Self-Storage?

Bankers are looking for a minimum of 5 years of stabilized history

Commercial banks will normally offer a 30-year amortization similar to residential lending.

Bankers are conservative and general offer a 65% Loan-to-Value

The most competitive self-storage loans fall at a 1.50 Debt Coverage Service Ratio (DCSR) or greater

You can expect commercial loan pricing at 180 basis points over the respective Treasury

(Submit you self-storage loan criteria on our application page.)

Commercial banks will offer 15-20 years of fixed-rate, commanding about 5 basis points to the spread over 10-years

Trim Financial will offer the following loan rates for your Self-storage units:

  • 3.75% on a 1.25 DSCR
  • 25 yr. amortization

Compared with commercial banks and credit unions who will offer owners of self-storage units the following loan terms:

  • 8.5% Debt Yield
  • Price to about 3.50% coupon
  • 30 yr. amortization
  • 4% on a 1.25 DSCR
  • 25-30-year amortization depending on location

Feel free to reach out to Trim Financial with any loan questions for self-storage or with any commercial real estate investment opportunities that you would like to discuss with us!

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