location_on Montgomery Self-Storage
MONTGOMERY, NY
Investment Strategy : DEVELOPMENT
Investment Type : EQUITY
Cap-Rate : 3.5%
TARGET IRR :25.7%
TARGET AVG CASH ON CASH: 12.3%
TARGET EQUITY MULTIPLE : 2.06X
Estimated Hold Period : 1 Month
Estimated First Distribution : 11/2024
OFFERED BY DIVERSIFIED PROPERTIES, LLC
Market Overview
Diversified Properties, LLC is developing a 7-building storage facility in the town of Montgomery, Orange County, NY, located 60 miles Northwest of New York City.
The site is located in the Town of Montgomery, Orange County, NY, approximately 60 miles northwest of New York City, directly north of the New Jersey – New York border and west of the Hudson River. The site is readily accessible to Interstate 84, Interstate 87, and Palisades Parkway, as well as local roads US Routes 6, 9W, and 209.
According to the United States Census Bureau, Orange County's total 2020 population was 401,310 (a 7.6% increase over 2010) and has been among the fastest-growing regions in the NYC metropolitan area. The Town of Montgomery's 2020 population was 23,322 (a 3.2% increase over 2010).
According to the Orange County Partnership Center of Economic Development, the site is also easily accessible to many of Orange County's largest employers, including US Military Academy (West Point), Orange County Regional Medical Center, Crystal Run Health, Access: Supports for Living, St. Luke's Cornwall Hospital, Elant, C&S Wholesale Grocers, Amscan and Empire Blue Cross/Blue Shield.
Submarket Overview
The Town of Montgomery, which has a total area of 51.1 square miles, is bordered on the east by the town of Newburgh and on the north by Shawangunk in Ulster County. The Property is proximate to several large retailers, including Costco, Walmart, Home Depot, and Target.
Sources provided by niche.com, U.S. Census Burea, CoStar, and VisitNC.com.
The site is located at 674 Route 17k in the Town of Montgomery and is readily accessible via Interstate 84, Interstate 87, and Palisades Parkway, as well as local roads US Routes 6, 9W, and 209. The town also benefits from extensive mass transit options, including Stewart International Airport/Air Force Base, the Metro-North Railroad, and numerous bus lines.
Square foot per capita in the 10-mile radius is 2.97 square feet/capita. This compares with 8.33 sqft/capita within a 3 miles radius and 10.92 sqft/capita within a 5 miles radius. For other comparison purposes, the US national average is 7.46 sqft/capita.
The rental rate in this market has trended up in the last 3 months, by a total of 1.43%. This would indicate an increased demand against available supply. In addition to the Subject, within a 3 miles radius, there is one known new development and within a 5 miles radius, there is one known new development. The Property is located on 17K, a well-trafficked road near Route 87 and conveniently accessible to several cities in the area.
The investment offers platform investors an attractive target internal rate of return of 20.2% and an equity multiple of 2.06x. Self-Storage has historically outperformed other real estate asset classes due to the business model of short-term, month-to-month leases. These short-term leases allow the property manager to increase rents for new prospective tenant
Due to the lack of supply and overall development regarding new self-storage facilities in Montgomery, NY, and the surrounding area, this development would deliver a brand new Class A climate-controlled self-storage facility to the market. In the market, there is currently 2.97 sqft/capita supply which proves that the market is undersupplied. The US national average is 7.46 sqft/capita, and the New York state average is 3.83 sqft/capita
The site is located at 674 Route 17k in the Town of Montgomery and is readily accessible via Interstate 84, Interstate 87, State Route 17, and Palisades Parkway, as well as local roads US Routes 6, 9W, and 209. In addition to its ideal location, there are significant barriers to entry in this market due to the strict land use laws. As a result, demand for self-storage remains high while supply remains low due to the barriers to entry. Diversified Properties, LLC has built a track record over the past 10 years in the Upper Hudson Valley area building multiple multi-family communities. Due to several factors, there has been a large migration of individuals living in New York City moving to nearby suburban areas.
Construction Completion Date
Q4 2023
# of Storage Units
495
Square Feet
80,400
Land Acquisition Price
$1,270,000
Target Return on Cost
$4,861,401
Exit Cap Rate
5.0%
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The Sponsor has closed on the acquisition of the land and has started the site work for the project.
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The exit strategy is to sell the property in 4 years at 5% cap rate
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The facility is a prime location and offers access to Interstate 84 and 87 with traffic counts over 50,000 vehicles per day.
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Self-Storage is a great inflationary hedge due to short-term month-to-month leases that will allow the property manager to maximize gross potential income.
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Construction will be directly managed by the sponsor's hands-on executive team and its in-house construction management firm, Morris Construction Management, LLC.
Business Plan
Diversified Properties, LLC ("Sponsor") is developing a 7-building self-storage facility in the Town of Montgomery, Orange County, NY, located 60 miles northwest of New York City. Sponsor plans to build, stabilize and sell the asset. Sponsor currently owns the land and the site work is under construction.
Total development cost is approximately $14,589,216 ($181.50 per GSF). The development will be funded by a $10,850,000 construction loan (74.4% LTC) and $3,739,216 of equity (LP equity $3,200,00 or 85.6%; Sponsor equity $539,216, or 14.4%).
Construction started in March 2022 and is planned to be finished by October 2023. Project stabilization is estimated to be August 2026. The asset is anticipated to be sold at stabilization in September 2026 at a 5% exit cap rate generating gross sale proceeds of $19,904,135 (or $247.60 per GSF).
Development Budget
Acquisition Cost
$ Amount
Per Unit
Purchase Price
$1,270,000
$2,566
$15.80
Total Acquisition Costs
$1,270,000
$2,566
$15.80
Development
$ Amount
Per Unit
Per SF
Hard Costs (GC)
$9,789,000
$19,776
$121.75
Soft Costs
$1,816,690
$3,670
$22.60
Total Development Costs
$11,605,690
$23,446
$143.65
Carry Costs
$ Amount
Per Unit
Per SF
Interest and OpEx Reserve
$1,658,526
$3,351
$20.63
Financing Fees
$55,000
$111
$0.68
Miscellaneous
$1,713,526
$3,462
$21.31
Grand Total
$14,589,216
$29,473
$181.46
Property Details
The site has been approved for the development of 495 units of self-storage in seven (7) buildings. There will be one 2-story climate-controlled building consisting of 39,000 GSF and six 1-story buildings consisting of 6,900 GSF each (41,400 GSF total).
The unit mix is as follows: 111 1st Floor units (22% of the mix), 131 2nd Floor units (28%), and 253 Ambient Drive-Up units (50%). The average unit size is 115 square feet (net) and individual units will be 10 feet by 10 feet. All buildings will be fully sprinklered. Per the zoning code, there are no standard parking requirements for self-storage units, but the project will have six (6) parking spaces (based on the portion of the building dedicated to office space).
Unit Mix
Unit Type
Type
# of Units
Avg SF/Unit
Rent/Unit/Mo
Rent/SF/Mo
Total Rent/YR
4x5
1st Floor
2
20
$84.96
$4.25
$2,039
5x10
1st Floor
5
50
$180.65
$3.61
$10,839
5x9
1st Floor
5
45
$171.86
$3.82
$10,312
10x10
1st Floor
21
100
$225.06
$2.25
$56,715
10x9
1st Floor
21
90
$212.97
$2.37
$53,668
10x12
1st Floor
2
120
$243.15
$2.03
$5,836
10x14
1st Floor
28
140
$259.75
$1.86
$87,276
10x18
1st Floor
2
180
$312.48
$1.74
$7,500
10x20
1st Floor
19
200
$331.08
$1.66
$75,486
13x20
1st Floor
1
260
$415.99
$1.60
$4,992
12x9
1st Floor
1
108
$230.45
$2.13
$2,765
10x8
1st Floor
4
80
$199.21
$2.49
$9,562
5x5
2nd Floor
4
25
$81.26
$3.25
$3,900
4x5
2nd Floor
1
20
$67.96
$3.40
$816
5x10
2nd Floor
19
50
$144.52
$2.89
$32,951
5x9
2nd Floor
12
45
$137.49
<$3.06/td>
$19,799
10x10
2nd Floor
17
100
$180.05
$1.80
$36,730
10x9
2nd Floor>
25
90
$170.38
$1.89
$51,113
10x13
2nd Floor
9
130
$194.89
$1.50
$21,048
10x12
2nd Floor
4
120
$194.52
$1.62
$9,337
10x14
2nd Floor
4
140
$207.80
$1.48
$9,974
10x18
2nd Floor
4
180
$249.98
$1.39
$11,999
10x20
2nd Floor
22
200
$264.86
$1.32
$69,924
13x20
2nd Floor
1
260
$332.79
$1.28
$3,993
12x13
2nd Floor
1
156
$216.76
$1.39
$2,601
12x9
2nd Floor
2
108
$184.36
$1.71
$4,425
5x13
2nd Floor
3
65
$145.68
$2.24
$5,244
10x8
2nd Floor
3
80
$151.92
$1.90
$5,469
10x30
Drive up
23
300
$523.87
$1.75
$144,588
10x10
Drive up
23
100
$257.89
$2.58
$71,177
10x20
Drive up
23
200
$370.65
$1.85
$102,300
10x15
Drive up
46
150
$287.56
$1.92
$158,731
10x10
Drive up
23
100
$211.39
$2.11
$58,343
10x20
Drive up
23
200
$370.65
$1.85
$102,300
10x10
Drive up
23
100
$211.39
$2.11
$58,343
10x20
Drive up
23
200
$370.65
$1.85
$102,300
10x10
Drive up
23
100
$211.39
$2.11
$58,343
10x20
Drive up
23
200
$370.65
$1.85
$102,300
Total/Averages
495
139
$265.16
$1.91
$1,575,039
Comparables
Lease Comparables
Beehive Self-Storage 155 Bracken Road, Montgomer, NY
StorageTown Rental Spaces 130 Neelytown Road,Montgomery, NY
StorQuest 765 South St, Newburg, NY
Montgomery Self-Storage 9 Factory Street,Montgomery, NY
Albany Post Self-Storage 2377 Albany Post Road,Walden, NY
Averages
Subject
Year Built
1981
1985
1985
2005
2001
1991
2023
SF
49,918
80,433
66,846
55,296
12,300
52,959
80,400
# Units
400
495
Estimated Occupancy
90%
90%
90%
90%
90%
90%
Average Rent/Mo (CC)
$216
$216
$130
Average Rent/SF (CC)
$2.28
$2.28
$1.88
Average Rent/Mo (NC)
$143
$129
$225
$155
$158
$162
$208
Average Rent/SF (NC)
$1.51
$1.35
$2.46
$1.61
$1.67
$1.72
$1.67
10x5 Rent/Mo (CC)
$136.00
$136.00
$173.00
10x5 Rent/SF (CC)
$2.72
$2.72
$3.46
10x5 Rent/Mo (NC)
$85.00
$77.00
$155.00
$90.00
$100.00
$101.40
10x5 Rent/SF (NC)
$1.70
$1.54
$3.10
$1.80
$2.00
$2.03
10x10 Rent/Mo (CC)
$214.00
$214.00
$217.00
10x10 Rent/SF (CC)
$2.14
$2.14
$2.17
10x10 Rent/Mo (NC)
$155.00
$137.00
$239.00
$160.00
$150.00
$168.20
$167.00
10x10 Rent/SF (NC)
$1.55
$1.37
$2.39
$1.60
$1.50
$1.68
$1.67
10x15 Rent/Mo (CC)
$299.00
$299.00
$0.00
10x15 Rent/SF (CC)
$1.99
$1.99
$0.00
10x15 Rent/Mo (NC)
$190.00
$173.00
$281.81
$215.00
$225.00
$216.96
$249.00
10x15 Rent/SF (NC)
$1.27
$1.15
$1.88
$1.43
$1.50
$1.45
$1.66
Distance from subject
1.5 Miles
3.2 Miles
6.33 Miles
3.37 Miles
4.74 Miles
3.83 Miles
*(CC) - Climate Controlled Unit
*(NC) - Non Climate Controlled Units
Sales Comparables
Active Adult Sales Comps
StorQuest Self-Storage Center
US Storage Center
Mohegan Lake Storage
Westchester Self-Storage
X-Tra Space Center
Averages
Subject Property
Date Sold
3/22/2022
11/29/2021
11/17/2021
11/17/2022
5/18/2021
Year Built
1960
1982
1970
1973
1971
2026
Building Size (SF)
66,846 SF
29,592 SF
63,681 SF
25,000 SF
12,727 SF
39,569 SF
80,400 SF
Sale Price
$19,510,000
$10,500,000
$30,806,000
$12,090,000
$7,200,000
$16,021,200
$19,904,135
$/SF
$292/SF
$355/SF
$484/SF
$484/SF
$566/SF
$436/SF
$248/SF
Financial Projections
Sources and Uses
Total Capitalization
Sources of Funds
$ Amount
$/GSF
Debt
$10,850,000
$134.95
GP Investor Equity(1)
$539,216
$6.71
LP Investor Equity
$3,200,000
$39.80
Total Sources of Funds
$14,589,216
$181.46
Uses of Funds
$ Amount
$/GSF
Purchase Price
$1,270,000
$15.80
Hard Cost
$9,319,000
$115.91
Hard Cost Contingency
$470,000
$5.85
Soft Cost
$1,709,325
$21.26
Soft Cost Contingency
$107,365
$1.34
Interest and OpEx Reserve
$1,713,526
$21.31
Total Uses of Funds
$14,589,216
$181.46
(1). The Sponsor's equity contribution may consist of friends and family equity and equity from funds controlled by the Sponsor.
(2). Includes closing costs and Reliance Technology Solution Licensing Fee.
Debt Assumptions
The expected terms of the debt financing are as follows:
Lender: Salisbury Bank
Term: 2 Years (+1 Year extension)
Loan-To-Value:74.4%
Estimated Proceeds: $10,850,000
Interest Type: Floating
Spread above one-month SOFR: 0.50%
Interest-Only Period:3 Years
Annual Interest Rate: WSJ Prime + 50bps with Floor Rate of 4.75%
Amortization: None
Estimated Proceeds: $33,000,000
Prepayment Terms: If refinanced with a bank other than Salisbury, subject to a prepayment penalty of Year 1: 5%, Year 2: 4%, Year 3&4: 1%
Extension Requirements:None
Refinance Information: Salisbury Bank's commitment letter includes a construction loan that converts into a permanent loan upon Property stabilization
Lender: Salisbury Bank
Term: 5 Years
Estimated Proceeds: $10,850,000
Interest Type: Fixed
Annual Interest Rate: fixed at the prevailing 5-year FHLBB Classic Advance Rate + 1.90%
Interest-Only Period: The Sponsor assumes an additional interest-only period of 12 months given the Property is not expected to stabilize until the end of the hold period. The lender will not contemplate granting an additional i/o period until such time that the construction loan extension is expiring (Month 36).
Amortization:25 Years
Rate: 5.25%
(1). The Sponsor has secured an interest rate cap with a 2.75% strike rate for the debt in place, capping the max interest rate at 7.50%
(2) The Loan is cross-collateralized with another property named Waterford Hills Apartments. The Waterford Property is located at 6219 Waterford Hills Drive, Charlotte, North Carolina 28269. Prospective investors are encouraged to read the PPM which provides more details on the cross-collateralization
Distributions
Diversified Properties, LLC intends to make distributions as follows:
(1). To the Investors, pari passu, all cash flow available for distribution to an 8% Preferred Return.
(2). 25% Promote Sponsor of cash flow available for distribution up to a 12% IRR - (64.18% to Investors / 35.82% to Sponsor)
(3). 35% Promote Sponsor of cash flow available for distribution up to a 15% IRR - (55.63% to Investors / 44.37% to Sponsor)
(4). 45% Promote Sponsor of cash flow available for distribution thereafter - (47.07% to Investors / 52.93% to Sponsor).
Diversified Properties, LLC intends to make distributions to investors after the payment of the company's liabilities (loan payments, operating expenses, and other fees as more specifically set forth in the LLC agreements, in addition to any member loans or returns due on member loan).
Distributions are expected to start in November 2024 and are projected to continue on a quarterly basis thereafter. Distributions are at the discretion of Diversified Properties, LLC, who may decide to delay distributions for any reason, including maintenance or capital reserves.
Diversified Properties, LLC will receive a promoted/carried interest as indicated above.
(1). (1) Reliance Technologies, LLC and its affiliates do not provide any assurance of returns. Returns presented are net of all fees. Please carefully review the Fees and Disclaimers sections below for additional information concerning Sponsor's use or projected returns and fees paid to Sponsor and Reliance Technologies, LLC.
Fees
Certain fees and compensation will be paid over the life of the transaction; please refer to GVA Real Estate Group's materials for details. The following fees and compensation will be paid
One-Time Fees:
Type of Fee
Amount of Fee
Received By
Paid From
Construction Management Fee
5.0% of Hard Costs (Exclusive of Land)
Diversified Properties, LLC
Capitalization
Developer Fee
4.0% of Hard and Soft Costs (Exclusive of Land)
Diversified Properties, LLC
Capitalization
Technology Solution Licensing Fee
Flat one-time licensing fees of $15,000 plus $1,500 per each prospective investor onboarded by Sponsor through its license and use of EP Technologies’ Technology Solution
Reliance Technologies, LLC
Capitalization (at Sponsor's discretion)
Recurring Fees:
Type of Fee
Amount of Fee
Received By
Paid From
Asset Management Fee
1.0% of Effective Gross Income
Diversified Properties, LLC
Cash Flow
Property Management Fee>
Greater of 5.0% of Effective Gross Income or $2,500
Third-Party Manager
Cash Flow
Administration Solution Licensing Fee
Flat quarterly licensing fee of $125 per investor serviced by Sponsor through the license and use of EP Technologies' Administration Solution
Reliance Technologies, LLC
Cash Flow
(1). Fees may be deferred to reduce impact to investor distributions.
(2). Hard Costs + Hard Costs contingency + FF&E
(3). Please see the Fees and Disclaimers sections below for additional information concerning fees paid to Reliance Technologies, LLC.
Management
Diversified Properties, LLC
Diversified Properties, LLC (the "Sponsor") is a Montville, N.J.-based residential and commercial development and management company founded in 2000, specializing in value creation through the successful execution of multifamily, office, self-storage, retail, and industrial ground-up development and redevelopment projects throughout the northeastern United States. The Sponsor utilizes its substantial in-house expertise in acquisitions, architectural and engineering design, land use, entitlements, construction, leasing, sales, and property management, within an agile and scalable operational structure to capitalize on opportunities in key growth markets. Diversified Properties, LLC currently has developed real estate valued at more than $1.5 billion and boasts a portfolio valued in excess of $500 million.
With deep experience in multifamily development and management, Diversified Properties, LLC has successfully created dozens of multifamily communities comprising over 10,000 units across N.J., N.Y., PA, MD and CT and, today, manages an existing and development pipeline spanning 4,000 residential units across 10 diverse communities.
Highlighting their leadership position in N.J.’s real estate community, the sponsor was recently recognized as one of the state’s Leaders in Real Estate, Construction and Design by NJBIZ. Founder Nicholas Minoia was also recently named to NJBIZ's 2021 Power 50 in Real Estate list and was selected as a GlobeSt. Real Estate Forum Multifamily Influencer in 2021.
Diversified Properties Track Records
Property Name
City
State
Units
Year Built
Date Acquired
Sale Date
IRR
Clemson
Clemson
SC
146
2011
12/31/2013
12/1/2016
137%
Newing Oak
Austin
TX>
20
1970
4/1/2013
2/1/2018
43%
Sola Flats
Austin
TX
16
1972
2/1/2012
4/4/2018
36%
Midtown Flats
Austin
TX
41
1972
4/15/2015
4/30/2018
75%
Mueller Place
TX
86
1969
8/15/2015
7/31/2018
28%
Highland Flats
Austin
TX
24
1972
5/8/2015
8/21/2018
39%
Harmon Square
Austin
TX
74
1968
12/1/2017
10/4/2018
133%
Soco Flats
Austin
TX
20
1972
2/1/2015
10/15/2018
56%
Vanitas
Austin
TX
126
1971
9/15/2016
10/23/2018
29%
Velo
Austin
TX
70
1979
11/30/2016
10/26/2018
22%
Sum/Average
48
9,656
1976
11/10/2017
10/15/2020
45%
Buying Partners
Buyer's Agent
An experienced local, licensed real estate broker/agent will represent you in this transaction. They will negotiate on your behalf, from your first offer through closing.
Properties listed on Reliance are displayed from MLS data and are chosen by Roofstock for their investment potential—often as soon as it hits the market.
You can be represented in the purchase by a Roofstock-affiliated real estate agent who is an expert in investment properties and knows the local market.
Your offer can have an inspection contingency, which allows you to obtain a home inspection in order to review the property's condition.
Upon introduction to the Roofstock-affiliated agent, you may discuss your investing strategy with the agent who will assist you in the buying process
