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DEVELOPMENT

4 Rivers’ institutional-quality self storage development process is focused around delivering a high-quality finished product as efficiently as possible from both a time and cost perspective by:

  • Performing diligence with best available local consultants

  • Engaging with best-in-class storage operators (frequently REITs) to underwrite site, projected performance and nearby comps/competitive set

  • Layering in 4 Rivers’ proprietary rent underwriting methodology and tools

  • Engaging with our in-house construction management team, preferred GCs and design partners to formulate executable construction budget based on real-time construction cost information informed by deep relevant experience across a number of markets

Storage
Storage

Concurrently, 4 Rivers engages with its design teams to assess project feasibility and ensure adherence to local design standards, land use plans, etc.

  • 4 Rivers develops conviction around a base case pro forma and then stress tests its models based on varying critical input assumptions

  • Once a project is determined to meet 4 Rivers’ feasibility requirements, the deal team begins the process of engaging with the capital community to complete the project’s capital stack

  • Relationship banks and/or debt placement agents

  • Institutional-quality equity relationships

 

  • Advance design/pricing utilizing both design/build and open-bid GC processes to determine best budget pricing method to mitigate project risks 

  • Once project’s costs are fully known and risk of price escalation mitigated, commit client capital to project and proceed to closing

  • During construction phase daily project monitoring via OxBlue, weekly project calls and monthly on-site construction meetings ensure smooth construction execution and adherence to original project budget/schedule

Storage

Self storage is a “recession resistant” real estate asset class because it benefits from cyclical demand drivers inherent in both good times and bad times

  • During the GFC Self Storage outperformed all other real estate asset classes while experiencing an actual loss rate (foreclosures) of only 2%, by far the lowest of all major commercial real estate asset classes

    • “Up” Market Demand Drivers – population growth, renter household formation, mobility, job growth, consumer spending, urbanization, national home sale activity

    • “Down” Market Demand Drivers – downsizing, natural disasters, relocations, slowing housing market, COVID-like events, divorce

  • Self storage is amongst the best inflation-hedged real estate asset classes – short-term, month-to-month leases allow owners to better protect their real rates of return in an inflationary environment

  • Self Storage has been the top performing real estate asset class over the past 25 years growing at 13.6% annually according to NAREIT

  • Secular demand is increasing – over the last 15 years, the US has seen a 50% increase in adoption rates from 8% to now 12% of the population consuming self storage

  • The self storage industry is rapidly consolidating – in 2010 approximately 90% of the existing building stock was owned by operators with less than 5 total stores; by year-end 2022 that number had shrunk to 70.6%

  • Nominal cap rates are now closer to other property types from an acquisition perspective, but the self storage sector’s favorable capex profile has historically driven superior economic returns due to less leakage between Net Income and Free Cash Flow

  • The self storage industry continues to benefit from long-term demographic factors, including the aging of the millennial generation. The 80 million strong population cohort represents a little less than a third of all non-commercial self-storage renters. That proportion is likely to rise as the leading edge of the demographic group enters their primary income-earning years.

  • Private businesses are a major source of self-storage demand (19%) and more companies are likely to make use of such facilities in the years ahead. Utilizing self storage as a commercial warehousing solution offers companies a cost-effective option compared with office and retail rents. 

  • As of 2023, the US home ownership rate is near an all-time low of 65.7% - an increase in renters benefits self storage demand as most rental housing doesn’t offer the same on-site storage opportunities as owned housing

Jones Dairy Road Storage

ASSET MANAGEMENT

4 Rivers’ proprietary property-level asset management process commences once a development delivers or an acquisition is closed and is focused around optimizing a project’s operating performance in order to maximize the near and long-term value of the asset.

 

  • Actively manage property to align with original business/development plan

  • Manage third-party REIT property management team to optimize asset performance thru pricing strategy, marketing plan and unit inventory management

  • Track and catalogue every lease, every month and analyze property and manager performance metrics for areas for improvement

  • Specific milestones tracked to monitor property for upcoming capital events

  • Monthly project-specific calls with property management

Race Track Front Storage Development
Storage
  • Annual budgeting process

  • Post-delivery, pre-1 year delivery anniversary review improvements with GC to determine any warranty issues before GC warranty expires

  • Regular consultations with capital markets brokers to determine current market value pre-stabilization to determine if shorter-term hold periods than original pro forma may result in superior investment performance

  • Regularly attend industry conferences and REIT manager partner conferences to build/develop relationships with REIT management from CEO/CIO to regional territory leads

  • Debt management to ensure proper covenant compliance, cash flow sufficiency and carry cost/distribution calculations

  • Continually assess debt capital markets conditions relative to in-place project financing to determine if a more optimal debt structure may result in value accretion or enhanced distribution productivity.

ACQUISITIONS

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