Question #
What lessons were learned from the failure to recognize changed sign ordinances during a storage project deal?
Answer #
I got really excited about the deal because I could get in without having to buy land.
The owner was contributing land and becoming a partner.
The deal was at the end of a cul-de-sac in a business park, next to an expressway, and during the due diligence, I failed to recognize the sign ordinances had changed, not allowing a sign to be seen from the expressway.
I thought that would solve my visibility issues.
Also, household income was on the lower half of the city, but again I figured I could “market” my way to success.
I would totally advise someone else not to think that way.
Long story short, lease-up took way longer than I projected, and I realized we had to pivot or have real issues.
I proposed a capital call to create more parking, which was creating income, and wait until other competitors finished their lease-up.
Some of my partners refused.
I exchanged free and clear land for their equity, which they asked for rather than stay in the deal.
We did the pivot, then sold the property as a “must take” with another very successful storage project and made a profit.
This is the only deal I have done in which some of the partners did not make a profit from the storage project, the ones who took the free and clear land.
I hope they made a profit from the land.
People tell me not to feel bad because they chose not to stay in the deal, but perhaps this would not have happened if I had followed my own advice.
Hindsight is always 20/20.
Source: The Five Biggest Mistakes I’ve Made Over My 31 Years In The Self-Storage Industry
