09 Nov 2021
This post is the first in a series of articles entitled: “Six Days of Feasibility” designed to educate the reader on the world of Feasibility Studies. Over the next 6 days Jay Garlick of GDP Feasibility will address the following:
This post is the first in a series of articles entitled: “Six Days of Feasibility” designed to educate the reader on the world of Feasibility Studies. Over the next 6 days Jay Garlick of GDP Feasibility will address the following:
Day 1: See the End from the Beginning: What are Feasibility Studies?
Day 2: Don't Make Business Risky: Why a Feasibility Study?
Day 3: Self Storage = Cash Cow: How a Feasibility Study Makes You Money?
Day 4: Buyer Beware: Why Not all Feasibility Studies are the Same?
Day 5: Get You in the Game: What Do You Do with a Full Feasibility Study?
Day 6: Deal Makers, not Deal Breakers: Do You Have Someone to Walk the Path with You?
A few years ago, a JV partner who was working on syndicating one of our projects called and asked me to speak with a “gatekeeper” investor who advised others on where to place their funds. He wanted me to review our feasibility study with this investor. As I recall, we spent the next 45 min reviewing the conclusions of the feasibility study I did together. I was able to explain to him our methodology, its history, our metric-based approach, our selection of hurdles for the 9 metrics that determine the feasibility of our project, and what it meant in this case when it came to financial feasibility. He came away wildly impressed and approving. He ended up investing in our project as did others.
On the same project, our bank’s credit department and loan officer wanted a similar review. They had obtained an appraisal that was rather dismal and were concerned about its results. We spent an hour together in review, discussing the level of detail I put in to investigating each of our competitors, which comps were not relevant, and what various details of the report meant. If I recall, I projected a 36-month lease-up for this particular location and the appraiser suggested it would be much higher. After some discussion to persuade the bank to see it our way, the bank considered the way we conducted our feasibility study and decided that our level of detail and understanding of the market was better than the appraiser and decided to move forward.
Today, that project is still in lease-up at around 40% occupancy and is on pace for just over 30 months instead of the 36 months I had projected and well below the appraiser’s projections. Further, that 40% occupancy included lease-up during a rather rough COVID environment that affected things for about a year.
Should your feasibility studies come back positive, the fact of the matter is you will at some point need to defend your feasibility study to investors and lenders and your consultant should have the skill and experience to do that effectively. You should expect that kind of service and expertise in persuading stakeholders to move forward with you at the very best terms possible.
The feasibility consultant should be able to:
Conversations between you, your banks, investors, and your feasibility consultant can make or break a deal. Make sure that you choose wisely in that regard. A good choice can even improve your chances for the very best terms possible and make you more money and increase trust with stakeholders.
Who is Jay Garlick?
A self-storage developer himself, Jay Garlick is the Principal at GDP Feasibility and Partner/CEO of Greenscape Development Partners which specializes in self-storage development nationwide. Garlick began doing feasibility studies in 2004. Since then he has done studies on over 400 sites in the United States. Jay has a Masters Degree in Real Estate Development (MRED) and will soon finish a second in Masters in City and Metropolitan Planning (MCMP). Garlick has developed and or entitled his own projects coast to coast in UT, WA, MO, KS, and VA. Garlick can be reached at jay@gdpfeasibility.com. For more information please visit www.gdpfeasibility.com.
