All - my firm is looking at self storage investments as a new area. We are all getting up to speed and myself and the associate on my team have been charged with building the template model.
Can someone explain, if possible, how Existing Customer Rate Increases are modeled? I can’t quite figure out how to combine (1) monthly leases, (2) tenant churn over the average length of stay for the leases, and (3) increasing the remaining tenants rent by the ECRI on a defined period. For example, if 2,000 SF leases in month 1 and by month 6, 1,500 SF is remaining, increase these tenants rents by 5%. By month 12, 1,000 SF is remaining - increase these tenants rent by 5%.
Does anyone have any advice they can share? Or formulas?
thanks!
It's kind of a balance sheet tracking exercise. You have X tenants that move in each month that need to be tracked, these tenants turnover at a rate of x% per month, at month X+Y the tenants in that bucket receive a Z% increase. Eventually all these tenants will move out within 18 months or so, but in the meantime you will get a nice bump over market rent. Ultimately when I modelled this it was about a 30 bps increase in the yield to assume ECRIs vs. not assuming ECRIs, just market rent growth.
Thanks. Any shot you can share a formula or spreadsheet? I conceptually understand it just don’t get how to model it because you are tracking 18 months of churn
I know it doesn’t move the needle much because I can model it a ‘hard code’, but can’t figure out a dynamic formula.
PM me
Sent! Thank you!
Would you mind if i PM you as well? Would appreciate opportunity to see a worksheet.
We own self storage assets. Can send over our ECRI tracker for the last 24-30 months. It's basically was our third-party PM sends me each month showing how much that month's ECRIs are.
At the end of the day, its algorithmic taking into account street rates, market vacancy, and property vacancy. Additionally, during the stabilization period (and even afterwards), the increases are a reflection of how aggressive the "teaser" rates were (relative to market rates) to get customers in the door.
Would love that! Will shoot you a DM. Thank you!
Sent. Though it’s not showing up in my inbox. Let me know if it didn’t go through, please. Thanks!
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