Loans for self storage facilities

Stabilized or leasing up decides everything

Facility	First call	Also price
Stabilized, steady occupancy, institutional or experienced operator	CMBS conduit, life company	Bank
Stabilized, smaller, local operator	Bank, credit union	DSCR loan
New, leasing up	Bank (often the construction lender rolling into a mini-perm), bridge	Debt fund
Expansion or conversion of another building	Bank, bridge, construction loan	C-PACE for qualifying building systems
Several facilities	Portfolio or blanket loan, CMBS	Separate bank loans

Programs ranked for a stabilized facility

Rank	Program	Wins when	Loses when
1	Bank	Local operator, smaller facility, flexible structure	Recourse, shorter fixed term
2	CMBS conduit	Non-recourse, interest-only, secondary markets	Defeasance, cash management
3	Life company	Strong operator, good market, low leverage	Small facilities, weaker locations
4	Credit union	Relationship pricing	Size caps
5	DSCR loan	Speed, small facilities	Rate

What storage underwriters focus on

• Physical and economic occupancy. Units rented versus rent actually collected. Promotions, delinquent accounts and auctions all show up in the gap.
• In-place versus street rates. The rates new customers pay against what existing customers pay. Lenders underwrite in-place collections.
• Trailing performance and seasonality. Storage rents seasonally, so lenders want enough history to see a full year.
• Supply pipeline. New facilities planned or under construction within the trade area. This is the most common reason a storage loan is cut.
• Unit mix. Climate-controlled share, drive-up units, vehicle and boat parking, and how each rents.
• Other income. Tenant protection or insurance income, truck rental and retail sales. Lenders haircut income that is not rent.
• Operator and management. Third-party management platforms, revenue management and online rentals. Self-managed facilities get a market management fee in the underwriting.
• Property taxes. Many jurisdictions reassess on sale, and storage has thin expenses, so a tax increase moves NOI a lot.
• Physical items. Roofs, doors, paving, security and gate systems; for conversions, the original building’s condition.

Sizing example (illustration)

An illustration, not a quote. A stabilized facility valued at $12,600,000 with $820,000 of NOI on the seller’s statement. The lender rebuilds NOI at $760,000 by using in-place collections, a market management fee and a tax reassessment on the purchase price. Assumed bank tests: 65% LTV and 1.30x DSCR on a 25-year schedule at an illustrative 6.85%. These are assumptions for the example.

Test	Seller’s NOI ($820,000)	Lender’s NOI ($760,000)
LTV (65%)	$8,190,000	$8,190,000
DSCR (1.30x, 8.37% constant)	$7,539,000	$6,987,000
Loan	$7,539,000	$6,987,000 (55% LTV)

The two adjustments together cost about $550,000 of proceeds. A purchase with a large tax reassessment is the most common reason a storage buyer brings more equity than planned. Rerun it with your own figures in the DSCR calculator.

Building or converting a facility

Storage is often built ground-up or converted from another use, then leased up over a few years. The usual path:

1. Construction loan from a bank, sized to cost. The bank’s supervisory ceiling is 80% maximum LTV for commercial, multifamily and other nonresidential construction, and the HVCRE rule in the FAQ above sets how much equity keeps the loan on standard capital treatment.
2. Lease-up under the construction loan’s extension or a bridge loan, with interest reserves.
3. Permanent loan once trailing income supports it: bank, CMBS or life company.

C-PACE can fund qualifying energy, roofing and building-system costs in states with active programs, with the senior lender’s consent. See construction loans and bridge versus permanent.

Programs to avoid

• Agency and FHA programs. Not eligible.
• Permanent CMBS or life company money before stabilization. It will size on today’s income and lock in a small loan with heavy prepayment.
• Hard money as a hold loan. A short bridge at most.