Johns Hopkins Carey Business School Self Storage Facility Development at 9653 Belair Road, Perry Hall, Maryland 21236 By: David L. Taylor, Jr. Advisor: Jay Gouline 5/7/2009 Self Storage Facility Development Table of Contents Executive Summary .............................................................................................................................................. 3 Site and Current Use ............................................................................................................................................. 4 Market Analysis ...................................................................................................................................................... 9 Region ....................................................................................................................................................................................... 9 Maryland/Baltimore County ........................................................................................................................................... 9 Market Delineation .......................................................................................................................................................... 10 Supply Analysis .................................................................................................................................................................. 11 Demand Analysis ............................................................................................................................................................... 16 Supply and Demand Interaction ................................................................................................................................. 22 Forecast Capture Rate ..................................................................................................................................................... 25 Development Program ...................................................................................................................................... 27 Proposed Site Plan .............................................................................................................................................. 28 Development Team ............................................................................................................................................. 32 Appraisal ................................................................................................................................................................ 34 Entity Structure .................................................................................................................................................... 36 Branding ................................................................................................................................................................. 38 Financials ............................................................................................................................................................... 39 References .............................................................................................................................................................. 49 Appendix A­Demographic Data Appendix B­Market Data Appendix C­Development Data Appendix D­Appraisal Data Appendix E­Financial Data 2 Self Storage Facility Development Executive Summary Over the past seven years the Perry Hall area of Baltimore County, Maryland has experienced considerable residential and commercial build‐out; particularly within its eastern and northeastern areas. Additionally, Baltimore County along with developer contributions has invested in many public infrastructure projects including sewer and the full extension of Honeygo Boulevard‐a four lane arterial‐ from White Marsh to Belair Road at the northern terminus of Perry Hall. Currently there are no self storage facilities in the northern Perry Hall area. This finding coupled with the above growth indicate profitable development potential may exist for a new Stor360☼ self storage facility and is the purpose of this analysis. Following is a summary of findings for a vacant commercial property in northern Perry Hall and development recommendation. Summary of Findings (for primary market unless specified otherwise): Subject Property: 9653 Belair Road, Perry Hall, Maryland 21236 Disposition: Currently marketed for sale by owner. Price subject to negotiation. Property Size: 12.12± acres; 6.5± net buildable acres Primary Market: 3 mile radius of property – 54,385 population Secondary Market: 3‐5 mile radius of property – 66,162 population Existing Competition: 3 independently owned self storage facilities Supply Analysis: 168,950 square feet of self storage or 3.10 square feet per capita Demand Analysis: 310,261 square feet of self storage or 5.70 square feet per capita (2009 projections) Zoning: Self storage not permitted by right‐Planned Unit Development (PUD) required (18± month process) Special Conditions: Entrance to property is narrow‐will require off‐site easements. Visibility into property is poor, signage is very important. Projected Cost: $6,585,800 unleveraged Holding Period: 20 years Cash‐on‐Cash Return: Below 1 5% requirement (range = (21.83%) to 6.99% unleveraged) Unleveraged IRR: 0.47% Development Recommendation: Development of the 9653 Belair Road property for a new Stor360☼ self storage facility is not recommended. There is considerable risk associated with obtaining entitlement approvals with no cap on timing or costs to obtain same. Additionally, site development costs and projected land purchase price are beyond the carrying capacity of anticipated market rents for a self storage facility in this area. However, the supply and demand interaction analysis indicate the northern Perry Hall area exhibits strong demand characteristics for a new self storage facility with limited competition due to physical or perceived travel barriers. Therefore, further review of the area for potential development sites with lower cost profiles is recommended. 3 Self Storage Facility Development Site and Current Use The subject development tract (Figure 1) is located in Perry Hall, Maryland in Baltimore County along the east side of U.S. Route 1/Belair Road (9653), and 600 feet south of the intersection Belair Road and Forge Road. The property consists of one parcel totaling 12.12± acres (parcel 12) and includes approximately 25’ of road frontage along Route 1. The parcel forms an irregular shaped rectangle that is narrow (25’ wide) closest to Belair Road and then widens to nearly 380 feet wide at roughly 466 feet into the site. From this point the site is uniform in width and extends another 1500 feet to the east. Figure 1. Aerial view of Property The property is currently vacant in terms of use. A gravel and broken macadam driveway extend from Belair Road back to existing structures on an adjacent property. The remaining ninety five percent of the site consists substantially of open meadow, with scrub brush, and woods along the north and eastern boundaries. A narrow but deep drainage ditch runs along a good portion of the northern tract boundary and a small stream runs along the back or eastern part of the site. To the north of the property (Figure 2) at its frontage is a parcel with several existing but vacant structures formerly used as a residence, barns for storage and a fruit/vegetable stand. Immediately north of the vacant parcel is a long rectangular parcel currently used by Baltimore Gas and Electric (BGE) as a staging facility on the front half. The remainder is mature woods. The BGE property abuts the subject site along its northern boundary for nearly 1,350 linear feet. South of the property are two developments. The first and closest to Belair Road is a single story, two tenant retail building housing a pizza/sub shop and liquor store. Surface parking and a mono‐pole cell tower are also on site. The second southern neighbor is a multi‐use development consisting of a three story class B office building, a commercial bank with drive‐thru, parking field and large stormwater management (SWM) facility. East of the site is a single family residential subdivision that is currently under construction. The western tract boundary abuts Route 1 and is immediately across from several multi‐story office/retail structures including a tavern and drug store. 4 Self Storage Facility Development Figure 2. Aerial Perspective of Property Current Ownership: Parcel 12 is currently owned by Cross Roads Reserve, LLC and was recently being marketed by CB Richard Ellis to potential developers of office, retail, and restaurant space. The current owner has expressed interest in selling the entire parcel, but is willing to entertain a formal subdivision of the property, or the creation of long term land leases with the appropriate entity. Urban Rural Demarcation Line (URDL): The site is completely within the URDL thereby making it eligible for available public water and sewer services. Zoning: The property is split zoned across three separate categories. The most flexible zone is Business Local (BL) which is located along the property frontage and extends 350± feet into the property. Behind the BL is a band of Business Local Restricted (BLR) which extends an additional 320± feet into the property. The remainder of the site is zoned Density Residential (D.R. 3.5). None of the above zoning categories allow self storage