In this edition of the monthly newsletter, we’re thrilled to bring you the latest on our newest investment opportunity, a compelling market comparison following a significant industry acquisition, and an update on beneficial legislative changes affecting our Tennessee investments.

Part 1: Latest Offering

As you probably know, we released our first deal in over a year to investors 2 weeks ago. We still have room for additional investors. Here are some high-level details:

Debt: We have secured a loan from FirstBank (TN). Terms:

• Interest Rate: 8.25% (current)
• Type: Floating (WSJ Prime minus 0.25%)
• Rate Ceiling: 8.5%
• Rate Floor: 4.5%
• I/O period: 12 months

Total Equity Raise: $2.45M

• $250k lower than the initially expected ($2.7M) after CapEx project quotes from GC

Projected Returns: Based on 5 yr hold (project level)

• IRR: 26.24%
• EM: 2.52x

Closing Schedule:

• Commitments Due: June 28, 2024 (first come, first serve)
• Signed Docs Due: July 8, 2024
• Funds Due: July 15, 2024
• Anticipated Close on the Property: July 24, 2024

If you would like to learn more, please follow this LINK, and we will have the investment memo sent to you. Alternatively, you can also just reply to this email.

Part 2: Storage Rental of America acquires Red Dot Storage – Comparing this to the deal we have under contract

This is a screenshot of an email I received Tuesday (6/11/24) from a friend at CBRE, detailing the acquisition of Red Dot by SROA (Storage Rentals of America).

Here are my takeaways and comparison to the deal we have under contract (UC).
​
​Macro thoughts:​
• Consolidation continues within the asset class
• Geographic footprint = more cap rate compression
​
​Comparing this to the deal we have under contract:​
• Price PSF Analysis: ~$82 PSF (Red Dot) vs $86 PSF (deal UC)
→ Our deal is particularly attractive as it will include over 50% climate-controlled units.
​
• Cap Rate Analysis: ~6.5% (Red Dot) vs. ~8.25% (deal UC)
→ Our deal shows a going in cap rate of approximately 8.25%, which is 175 basis points higher than the market rate observed in the Red Dot sale, without any immediate enhancements like rate increases or capital expenditures.
​
​Conclusion:​
We are positioned to outperform from a return’s perspective, reinforced by our current ownership of three (3) properties in the same geographic area as the new deal. This acquisition aligns well with our strategic objectives and demonstrates value from the outset.

Part 3: The government taketh & (sometimes) the government giveth back

We have four (4) investments in the state of TN. In TN, businesses are subject to Franchise & Excise Tax. The Franchise Tax, portion that affects our TN investments, is calculated on the greater of net worth or real/tangible property value in Tennessee (per TN Department of Revenue).
​
Since 2021, across four different entities, we've paid a staggering $89,717 of this tax.
​
But thanks to the recent passage of Senate Bill 2103, we are set to receive $77,204 in refunds later this month (checks are set to be mailed 1 - 5 weeks from filling date). Additional info: Notice #24-05 TN Franchise Tax Property Measure Repeal​

Here is a summary of what we paid and what we are getting back:

Did we see this coming? Not at all. Was it luck? Definitely. Have we been eagle-eyed on this since April? Absolutely.
​
Bottom line: Investors in our TN investments are going to get extra sprinkles on those monthly distributions in July.

- RuCo