Self storage bridge loans

What lenders look at

Physical vs economic occupancy

Physical occupancy counts rented units; economic occupancy compares actual collected rent to potential rent. A large gap points to discounting, delinquency or below-market rates.

Street rates vs in-place rates

Rates offered to new customers compared with what existing tenants pay. Lenders look at how rate increases on existing tenants have affected move-outs.

Climate control and unit mix

Share of climate-controlled units, unit sizes, and whether the mix fits local demand.

Management and software

Who manages the facility, the management software used, online rental capability and revenue management practices.

Competing supply

New facilities built or planned within the trade area. New supply can slow lease-up and pressure rates.

Ancillary income and site features

Truck rental, insurance or protection plans, retail sales, RV and boat parking, and security and access systems.

How leverage works

Many asset-based bridge lenders lend around 60–75% of as-is value on self storage, with lower leverage for facilities in early lease-up, in markets with significant new supply, or with low economic occupancy. When the plan includes adding climate control, converting an existing building or expanding on the existing site, some lenders size to loan-to-cost with the total capped by stabilized value. Bridge lenders here do not fund ground-up construction.

Use the commercial bridge loan sizer to see whether LTV or LTC decides your loan. The deal form asks for storage units, occupancy today and current NOI, so lenders see the numbers they size on.

Documents lenders ask for

• Unit mix and rent roll with street and in-place rates
• Occupancy report showing physical and economic occupancy
• Trailing 12-month operating statement and month-by-month history
• Management software reports and delinquency report
• Ancillary income breakdown
• Capital, conversion or expansion budget
• Purchase contract or current loan payoff statement
• Site plan and building information
• Insurance declarations and loss runs
• Entity documents and sponsor real estate schedule

How fast it closes

Self storage bridge loans commonly close in about 14–30 days. Lenders typically require an appraisal with a storage-specific market study, a Phase I environmental and a property condition report. Facilities converted from other uses may need more environmental and zoning review. Files slow down when management software reports don't match the T-12 or when the facility has been run informally with cash payments.

Common bridge scenarios

Under-managed acquisition

Buy a facility with below-market rates or weak management, then add software, online rentals and revenue management.

Lease-up

Carry a facility that recently opened or expanded until occupancy and income support permanent debt.

Conversion of an existing building

Fund the conversion of a vacant retail or industrial building into climate-controlled storage.

Maturing loan payoff

Pay off a loan that is coming due before the facility reaches stabilized occupancy.

Typical exit

Stabilized self storage typically refinances with a bank, CMBS or life company, or is sold to a storage operator or REIT.