Industrial outdoor storage prices on location, access and acreage. The improvements are fencing, paving, lighting and sometimes a modest structure. Which makes the land almost the entire asset.
IOS has been hard to finance conventionally for exactly the reason it is attractive: lenders underwrite buildings, and there is not much building. Loan proceeds against a yard are thin relative to price, which leaves a large equity requirement on an asset whose value is mostly dirt.
Selling the land addresses the gap at its source. The buyer keeps the yard improvements, the tenancy and the upside, and the equity requirement falls by the land price rather than by a loan the lender was never going to make.
Rent is sized at 25–30% of stabilized NOI and capitalized in the mid 6s, with coverage of 3–4 times at origination. On a yard with a high land share, the binding constraint is usually the proceeds cap against appraised value rather than the coverage test.
Worth saying plainly: institutional ground lease capital is built around multifamily, office and hotel. IOS sits outside it almost entirely, at any size, which is why there is generally no competing bid for the dirt underneath one.
No. Land only. Paving, fencing, lighting and any structure stay with the operator, along with the depreciation.
Not necessarily, but the proceeds cap against appraised value tends to bind before the coverage test does, because the land share is so high.
It is the main diligence item. IOS uses are frequently legal non-conforming, and we underwrite the entitlement position carefully.
Land checks of roughly $5 to $40 million. Many IOS yards sit at the smaller end of that, which is fine.
Stabilized NOI, purchase price or total cost, acreage and the zoning position.
Stabilized NOI, price or total cost, acreage, zoning status. A number back inside a week.
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