Case Study #1 - Mokena Self Storage

Fernando Angelucci is working on a large deal in Mokena, Illinois. This is a project that he is very proud of and excited about.
In this video, Fernando discusses this project, how he found it, and what the different factors he had to take into consideration. Everything is covered including his thought process as well as the results or expected results of the project is in this 7-minute video.
Fernando O. Angelucci is Founder and President of Titan Wealth Group. He also leads the firm’s finance and acquisitions departments. Fernando Angelucci and Steven Wear founded Titan Wealth Group in 2015, and under his leadership, the firm’s revenue has grown over 100% year over year. Today,
Find out more at
https://www.TheStorageStud.com
http://titanwealthgroup.com/
Titan Wealth Group operates nationwide sourcing off market investment properties for Titan Wealth Group’s acquisition as well as servicing a network of thousands of active real estate investors world wide. Prior to founding Titan Wealth Group, Fernando worked for Dow Chemical, a Fortune 50 company, rolling out a flagship product estimated to gross $1B in global revenues.
With an engineering background, Fernando is able to approach real estate investing with a keen analytical mindset that allows Titan Wealth Group to identify opportunities and project accurate pictures of future performance.
Fernando graduated from the University of Illinois at Urbana-Champaign with a B.A. degree in Technical Systems Management.
Titan Wealth Group was founded in 2015 with the vision of gathering individual investors that have the means to invest but lack either the time to find high-yield investment opportunities or the access to these off-market deals. All too often, founders Fernando Angelucci & Steven Wear came across investors who had deployed their capital only to regret the lack of consistency or degree of returns their investments were producing. In response, Titan Wealth Group provides access to highly-vetted real estate secured investments and off-market acquisition opportunities primarily in the Greater Chicago MSA. Today, Titan Wealth Group not only assists individual investors but has grown to support the acquisition goals and capital deployment of investment groups, private equity firms, and real estate investment trusts (REITs).
As a facilitator of wealth growth, Titan Wealth Group believes that success is not limited to the sum of our efforts and is infinite with what can be accomplished through partnership.
#SelfStorage #RealEstateInvesting #AlternativeFunds

-------------------------------------------------------------------------------------------

So one of the deals I'm currently working on, one that I'm very proud of and extremely excited about is a large REIT grade Class A Self Storage facility in Mokena, Illinois, which is a Southern suburb of Chicago. It's a very interesting deal. And just goes to show how your network truly is your net worth. So I had a developer reach out to me with since become very good friends with. And he had a project in Mokena, but he was a little tight for funds and wanting to partner up and figure that more heads were better than one. So he brought me the deal and he said, Hey, Fernando, is this something that you'd be interested in participating in? I said, send over the due diligence information and I'll take a look and I'll let you know my level of interest. Well, when he sent over the due diligence package, I was extremely excited.
One of the things that we always look at as self storage developers is the amount of supply and demand in any given market. And when we say market we're specifically talking about the trade area right now. The trade area is going to be a one, a three, or potentially a five mile radius around the subject property. The reason for that is 90% to 95% of your customer base will come from that trade area depending on the density of the population in the area. So if you're in the urban center, it's going to be a smaller trade area. Whereas if, you know, farther out in the rural areas that you're going to have a larger trade area to encompass, cause it's based of the drive time. The amount of time someone's willing to drive to get to your self storage facility.
So the reason I was excited about this facility was when I looked at the demographic study, as well as the supply index ratios and the feasibility study, it showed that the market was extremely underserved almost by four times. Which means I would be able to increase the amount of storage in the area four times the amount that's currently there and still not meet the total demand.
So it was sitting at about a 1.5 net rentable square feet per capita. So 1.5 square feet of storage per person in that trade area, which is extremely low. The national average for equilibrium is about six square feet per person in your area. So that's why I saw that there's the ability to four times the supply. Once we build our facility, which is going to be roughly 140,000 gross square foot. Net rentable about 108,000 net rentable square feet. Will only be at a three to three and a half net rentable square feet per person in the trade air, which means that there's still a ton of demand in the area. And if we remember our, you know, economics 101 class, when there is unmet demand, the price increases to meet, to basically have the part of demand fall off. It's unwilling to pay those prices. So those are very good statistics for us.
This facility is going to be a REIT grade Class A facility. Now what I mean by that is it's a third generation facility. When you look at it from the outside, it almost doesn't even look like a storage facility. It kind of looks like a luxury office building. Luxury, you know, almost like commercial building. It's going to be three stories tall. They have really nice facade on the outside, massive landscape package. You're going to have huge sign and a lot of glass doors just so you can see glass windows. So you can see all of the brightly colored storage locker doors in it. It'll have roughly 960 units give or take a few, depending on how the final plan shake out. Sits on a four acre parcel and it'll take roughly 9 to 12 months for us to build it. It's a large structure, but we have a superstar development team on the project with us.
We will hold the asset for about four and a half years in total. So how does that break down? The first 9 to 12 months is actually building the facility and then getting CO or Certificate of Occupancy from the municipality. Once we have that, then we're going to start our leasing activities. It's going to take another about 24 months for it to break even. Which means that the cash flow coming from the property is enough to cover all the expenses and the debt service or the mortgage payments on the property. So now we're at about month 36 or so, and then from month 36 to month, you know, 50 to 52, 56 or so, we're going to be leasing up from break-even to what we consider stabilization. In the self storage industry, stabilization is considered 90% occupancy. The reason why it's not a hundred percent is because if you're at a hundred percent occupancy, that means that you're not charging high enough rents.
You always want to have a little bit of vacancy. And the reason why is a hundred percent occupancy facility at a certain rent threshold versus raising those rents and being at a 90% occupancy threshold, that 90% facility is actually going to be producing more cash flow than the facility that's at a hundred percent occupancy. So that's gonna take us about, you know, 50 to 56 months or so. At that point, we'll start courting the REITs. Now, remember I said before, this is a "REIT grade" facility. Now what that means is that you have these large Real Estate Investment Trust companies that specialize in self storage. They don't want to take the risk of building the facilities themselves because they're sitting on so much cash. They'd rather have somebody else do that. And then just come in and buy it. When it's ready to go to the market.
They want stable. They want consistent and safe returns for their investors through the stock market. So they would rather buy it once it's completely stabilized. These large REITs will actually come in and they're going to start making us offers in the very low cap rate ranges. Usually in the five to six, maybe six and a half percent cap rate range. Cap rate, just to remind you guys again is going to be your net, your annual net operating income divided by your purchase price or your build costs. Your all in total project costs. So this facility will be producing in excess of a million dollars in net operating income per year. And based off of that multiple, we should be able to sell this thing anywhere between $17million to $18million. Could be a really good deal. Our total cost into the project will float between $12million to $13million. So it'll be a pretty healthy return for the project. So we're really excited about that.
If you'd like to learn more about self storage or some other projects that we're working on currently, feel free to drop us a line. My name is Fernando Angelucci. And I'm The Storage Stud.