In April, real estate investment firm NitNeil Partners opened a self-storage facility in Chattanooga, TN. In the blink of an eye, at least in real estate terms, NitNeil already has sold the facility to the third-party management company it had hired to run it.
Publicly traded REIT Sovran Self Storage, operator of Uncle Bob’s, bought the 57,545-square-foot storage facility at 1380 Broad St. in Chattanooga, TN, from Atlanta-based NitNeil. NitNeil had hired Uncle Bob’s to manage the facility, which opened in April 2014.
“The property got off to a really strong start where rental absorption was greatly exceeding our pro forma,” said Nitesh Sapra, a principal at NitNeil.
Based on the early success, Uncle Bob’s approached his firm with an offer, according to Sapra. Of the four publicly traded self-storage REITs, Uncle Bob’s has the largest presence in Chattanooga, with six locations.
“We were able to get a fair price from them, which allowed us to achieve our five-year business plan and deliver a healthy return to our investors,” Sapra said.
The purchase price was not disclosed, but Sapra said the deal generated a 180 percent internal rate of return.
According to local property records, NitNeil bought land for the facility in July 2013 for $700,000. NitNeil had taken out a $3.8 million acquisition and construction loan for the project.
One factor contributing to the success of the facility was a lack of supply in downtown Chattanooga, Sapra said. “We were really intrigued by the Chattanooga market, given the renaissance of the downtown corridor,” he said.
After a number of trips to the city last year, Sapra found a well-located site with entitlements already in place.
“This is the only Class A facility in Chattanooga,” Sapra said. “This particular facility is part of the latest generation in product which clearly differentiates itself from the legacy storage product.”
NitNeil has self-storage development projects underway in Florida, Georgia, North Carolina and South Carolina. NitNeil owns 13 facilities in Alabama and Georgia, all of which are managed by publicly traded REIT Extra Space Storage.