Refinance and Capital Improvement Financing for an 881-Unit Self-Storage Facility

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THE PROPERTY

An 881-Unit, Fully Climate-Controlled Self-Storage Facility Spanning 90,639 Rentable Square Feet in a Former Kroger Grocery Store in Carrollton, Texas

The property at 2515 E. Rosemeade Parkway in Carrollton, Texas is a Class A self-storage facility built out of a former Kroger grocery store that occupied the site from its original 1986 construction through the property's acquisition and redevelopment. The building spans 90,639 rentable square feet on a 4.21-acre parcel, situated on Rosemeade Parkway, one of the submarket's primary commercial thoroughfares, and surrounded on all sides by multifamily developments and single-family neighborhoods. Following a comprehensive 16-month renovation in 2017, the property was fully converted into an 881-unit self-storage facility and opened to tenants in March 2018. All 881 units are climate-controlled, a product differentiation that places the facility among the most modern and well-equipped properties in its trade area, and the two-floor layout is served by two elevators to accommodate tenant access across both levels.

At the time of RRA's loan closing in March 2020, the facility had been operating for approximately two years and had reached 49 percent physical occupancy, with 434 units occupied and 447 units remaining available for lease. The property was managed by CubeSmart, one of the largest self-storage REITs in the United States with over 1,200 facilities across 37 states, 500 of which are managed for third-party owners. CubeSmart's affiliation provided institutional-quality revenue management, marketing infrastructure, and a national reservation platform, underpinning the lease-up projection.

THE RRA SOLUTION

$7,930,000 First-Position Refinance Loan Retiring $7,095,000 in Construction Debt, Including a $200,000 Holdback for Roof Replacement and a $595,000 Interest Reserve

RRA provided a $7,930,000 first-position loan closing March 6, 2020, structured to refinance the sponsor's existing construction debt and provide capital for ongoing property improvements and lease-up support. The initial disbursement of $7,730,000 retired approximately $7,095,000 of outstanding construction financing, funded estimated closing costs of $170,000, established a $595,000 interest reserve to supplement cash flow during the continuing lease-up period, and funded a $110,000 tax and insurance impound. The remaining $200,000 was held as a capital expenditure holdback earmarked for a roof replacement to be completed in Year 1 of the loan term. Sponsor equity of approximately $283,500 covered the shortfall between the refinanced debt balance and total project costs. The loan was repaid in full on January 5, 2022, approximately 22 months after origination.

THE CONVERSION

From Vacant Kroger to 881 Climate-Controlled Units: A 16-Month Adaptive Reuse Transformation Completed in 2017

The property's history as a Kroger grocery store positioned it for a particularly well-suited conversion to self-storage. Grocery stores are large, single-story or low-rise commercial buildings with extensive floor plates, high clear heights, loading infrastructure, and prominent road visibility. When the Kroger vacated, the sponsor identified the property as an optimal candidate for repositioning: the building's scale accommodated a substantial unit count, its location on a major arterial provided the customer-facing visibility essential to a retail-oriented use like self-storage, and the surrounding residential density created immediate proximity to the facility's target customer base.

The 16-month renovation in 2017 converted the building's entire footprint into two floors of fully climate-controlled self-storage. The build-out included internal climate control systems, access control and security infrastructure, elevator installation for upper-floor access, interior demising walls and unit framing across 881 individual units, and a customer-facing leasing office. The facility opened to tenants in March 2018, becoming the newest Class A self-storage property in a trade area with 18 existing competitors totaling over 1.3 million rentable square feet. At the time of RRA's loan closing two years later, the property retained its distinction as the newest facility in the competitive set and one of the only properties in the market offering fully climate-controlled storage across its entire unit inventory.

THE LOCATION

Rosemeade Parkway in Carrollton, 20 Miles North of Downtown Dallas, Surrounded by Dense Residential Development with 53% Renter-Occupied Households Within Three Miles

Carrollton is a suburban community in the northern Dallas metro, situated approximately 20 miles from downtown Dallas and positioned within one of the most densely populated and fastest-growing corridors of the Dallas-Fort Worth metroplex. The property's address on Rosemeade Parkway provides high-visibility frontage along a primary commercial arterial that runs through the heart of the submarket, with the immediate surroundings consisting almost entirely of multifamily apartment communities and single-family residential neighborhoods. This residential density, concentrated directly around a well-located former grocery store, is a particularly favorable condition for self-storage demand.

Within three miles of the property, 53 percent of residents live in renter-occupied housing, compared to 36 percent across the Dallas MSA and 35 percent nationally. Renter occupancy is the primary demographic driver of self-storage demand, as renters typically occupy smaller units with less dedicated storage space and generate higher rates of storage unit utilization and turnover. The area's median household income within three miles was projected to grow over 20 percent over the five years following underwriting, reaching approximately $83,474, a level well above the national median. Population within the three-mile trade area had grown approximately 12 percent over the prior decade, with continued growth projected over the following five years.

THE MARKET

18 Competitors and 1.3 Million Rentable Square Feet Within Three Miles, with a 10.1% Stabilized Vacancy Rate and No New Supply Planned in the Trade Area

RRA's underwriting identified 18 self-storage facilities within a three-mile radius of the property, representing a combined inventory of over 1.3 million rentable square feet across more than 12,000 units. Despite the scale of existing supply, the trade area's stabilized vacancy rate was 10.1 percent at the time of underwriting, a healthy figure for a market that included several large, well-operated national operators including CubeSmart, Public Storage, and Extra Space. Competing facilities ranged from 0.1 miles to 2.9 miles from the property. Developers and operators in the Dallas MSA generally target occupancy rates between 85 and 90 percent, and the trade area's stabilized supply was operating near those levels.

The subject property held two structural advantages over the existing competitive set. First, it was the newest facility among all 18 competitors, having opened in March 2018 following a modern build-out that left it with more current interior finishes, technology infrastructure, and climate control systems than older properties in the market. Second, it was one of the only facilities in the trade area offering fully climate-controlled units across its entire inventory. In the Southern and Western United States, climate-controlled units historically command rents 20 to 40 percent higher than non-climate units, a premium that supported the property's ability to generate above-market rent per square foot as lease-up progressed. The Carrollton Planning and Building Department confirmed at underwriting that no self-storage facilities were planned, proposed, or under construction within the trade area, limiting the risk of new competitive supply entering the market during the loan term.

THE SPONSOR

A Real Estate Investment Firm Specializing in Adaptive Reuse of Obsolete Retail and Industrial Properties into Class A Climate-Controlled Self-Storage, with 50 Years of Combined Principal Experience

The sponsor is a real estate investment firm whose principals bring a combined 50 years of institutional real estate, investment management, and legal experience. The firm's strategy focuses on acquiring well-located but obsolete or underutilized retail and industrial properties at a discount to replacement cost and repositioning them as Class A climate-controlled self-storage facilities. The Carrollton property represented the execution of that thesis: a vacant grocery store in a high-density residential corridor, acquired in 2016 for $2.925 million, converted at scale over 16 months, and stabilized under a CubeSmart management agreement that brought national brand recognition, institutional operating infrastructure, and a deep network of reservation and marketing capabilities to a locally acquired asset.

The principals' backgrounds span institutional investment management, asset management, and commercial real estate law at major firms, providing the operational breadth to underwrite, execute, and manage a conversion of this complexity. The formal third-party management relationship with CubeSmart was integral to the business model: CubeSmart's in-house call center, revenue management systems, and marketing platform were positioned to accelerate lease-up, reduce the execution risk of managing a newly opened facility, and provide the sponsor with the institutional reporting and operational support typically associated with much larger self-storage operators.

A vacant Kroger in suburban Dallas. Sixteen months of renovation. 881 climate-controlled units, the newest facility in a trade area of eighteen competitors. The loan was repaid 22 months after closing.

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