EP: 0040 - Whatcom County Industrial Parks & Storage Condos. Bellingham Real Podcast w/Alicia Jansen Pennington

Whatcom County has many storage units and industrial parks throughout Bellingham, Ferndale, Lynden and Blaine Washington. Storage units can be an incredibly low maintenance cash flow investment that is sometimes overlooked by Real Estate investors.
Alicia Jansen Penningon shares with Paul Balzotti some of the options for both investing and developing storage units. 

1:00 About Alicia and her family's background in construction and development.
2:30 Different types of individual storage condos in Whatcom County. 
4:45 Financing options for storage units. 
6:35 Financing options for developing. 
7:20 New technology in storage projects. 
9:10 Benefits of investing in industrial or storage units instead of apartments. 
11:30 The I-5 industrial center in Ferndale available for sale.

For more, please contact Alicia at aliciap@johnlscott.com

Transcript

Hello and welcome to the Bellingham Real Estate Podcast. I'm Paul Balzotti I'm here with Alicia Jansen Pennington. Thank you for joining us. Alisha, you've been a realtor for several years and you are a expert in the world of storage condos and the whole industrial world. And that's the subject of today is talking storage condos, industrial, commercial land, developing, investing in that whole world.

Yeah. And, so getting right into it, share with everybody or anybody who's listening, you're a couple of things. Maybe you've sold it and your family background, because I know you've sold property in this, in this world, but also your family's in the business. Yeah.

Well, we were raised, by my dad. My dad has raised all of us. Kids have kind of branched out in one way or another in that industry of, you know, civil construction, development of all kinds and sorts. So, you know, I've sold a lot of industrial land listed a lot of industrial land, worked in that field. I was raised around that.

And, actually even worked on projects when I was younger.

Yeah. And your dad, the operator extraordinaire. Oh, nice. And your dad, by the way, how was your dad?

98.

98, which is remarkable. It's so awesome.

I'll be 99 in September. Yeah, we're we're hanging on.

I love it, I love it. And so you've sold you've sold land and and office industrial buildings basically. Essentially. What would you call those? Urban.

I've sold urban office buildings. also I've worked a lot with the development processes. yeah. You know, converting those sales from land into the building up from there.

Yeah. And, and we want to touch on you. You your family's invested in a project that you're selling, that you're listing. We'll we'll cover that. and, but in this whole subject of industrial parks, storage condos, there is the world of developing industrial and storage units. There's, there's building these for office space. Right. And and then there's also individual storage units that buyers buy individually.

Before we get into the projects that you're working on and you've invested in, I want to talk about individual storage units. Right. So, so talk to everybody about different types of individual storage condos in Whatcom County that are, that are bought and sold.

Well, there are lots of types, you know, you have your nicer I am ones that are in the urban limits that are, you know, climate controlled and have that kind of more modern vibe. there's just regular self storage. Those are not climate controls. And we have also specialty storage. Which specialty vehicle storage really. housing boats, motorcycles, RVs, that kind of thing.

And so, you know, they kind of limit as you go out into the county more, you're going to see probably more of those.

Yeah. Yeah. And and when you get into the first types, the, the storage units that are, you know, climate controlled things like that, you see bathrooms in that a lot. You'll see kind of man cave type setups. What what can you do in those and what can't you. Where. Well, what you know, what kind of uses do you have for those that you can, yeah.

You know, of the bylaws related to the storage units.

You have, you always have those guys that are going to, you know, my husband being one of them back in the day, you know, having their band practice in a storage unit. Yeah. and, you know, a lot of people do that legally. Washington state does not allow any kind of livestock, including humans. Yes. Animals or anything, to reside or live in storage units.

but they are used for all kinds of sources, you know? Yeah, yeah. I mean, people are in need of them when you're packing, moving in this residential real estate, it's. Yeah, I mean, I we have clients all the time that I need storage, I need storage, transitional periods. But you see it also in the commercial and industrial world as well.

There's different types of storage that is really needed.

Yeah. And so if you're an individual buyer who and you're right, there's definitely options as far as lower priced kind of more simple storage units you could buy or a higher end, heated, controlled with, you know, mezzanine and bathrooms and the whole thing. a lot of man cave type setups. what is the financing options for that?

Because you can't just go with a residential home. You know, we can go zero down, 3% down. FHA, what are the financing options for my storage unit?

They're mostly looked at as small business loan opportunities. So you know it it because you are going to be bringing in an income if you're going to purchase one and rent it back out. so an SBA loan is an option. And you know, the bigger you get those loans change. So but for smaller ones, I you know, SBA loan is the most common.

Yeah. So I mean you're basically looking at if SBA's the SBA, SBA if SBA is the only loan, commercial loans. I would bet that you also have a lot of people that would because SBA loans typically are 25, 30% down. The rates are typically higher. And so, you know, another option probably is like a home equity line or something like that.

And then you're paying cash.

Exactly.

But but if you want a loan okay. So it's commercial loans only.

Or mortgage backed loans are used I think sometimes too as well. Yeah.

Yeah yeah. And so and so and then so going from the individual storage units and there's a lot of variety here. And Whatcom County to the bigger industrial parks. So your family's involved and it's been involved in several project. Clearly. and talk to us about what that looks like when, when you're in your best in a project like that.

is it purely for usually like, is it typically for business is are more just for storage or either or both? what are the options as far as like the development side of, of storage units and industrial parks?

financing options, when you're building from the ground up the entire facility, you're going to be looking, you know, a lot of times people will use life loan type scenarios.

What's that? What's that mean?

The life loans are you know, it's a they're designed specifically for commercial large commercial building and production. And, moving up in there basically have a $2 million limit. And so there they go that way. otherwise a lot of people are using a combination of those financing options along with private, you know, silent investors, that kind of thing.

Yeah, because there's a lot more that goes into it when you're, you know, for sure you're going to tie down the land and then you're budgeting up from there.

And but okay, so why would you develop why would you want to develop or invest and a storage facility rather than residential per se?

Well, if you're looking for an amazing ROI return on your income, you know, there's very little overhead and there's not it doesn't require a lot of, you know, jobs and that kind of thing. And the storage units that we are building are, you know, it's not just going to be self storage. You know, they're also going to have smart they're smart phone access.

So people can basically have their own security all built into their units with their phone.

So you wouldn't necessarily need a security because obviously some of the storage, facilities, you have kind of a person on duty, or, or in some cases, I guess that's more that's more of a, some do. Right.

They do. And and you know, it's not that there may not be, you know, there's always a maintenance person, you know, somebody like that. But there's new technology now that you have smart access to your own facilities. a lot of them that you'll see around Whatcom County especially, you know, you've, electric access drive in, you got your key or your remote, that kind of thing.

So this is kind of a cool, new, innovative way to be able to to operate, manage things. Yeah. Low cost. And you know, you think about the, the return on investment in that sense. It's once it's filled it full capacity and 100% occupancy. You know, you're. It's a great investment.

So you see you're looking at maybe are you talking more like so with residential apartments on average your most of the properties are going for 5 to 6% cap rate. What you say with industrial it's averaging higher eight, nine, 10% kind of thing or what what are the rates you could be looking at for cash flow? I'm sure for yours, if they're brand new, that you be listing, maybe they're more maybe they're lower cap rate.

but is it generally just a little bit of a couple percentage higher than, say, apartment buildings?

It is. I mean, when you think about apartment buildings, you also have a lot of maintenance records. You write a lot of, human beings you're dealing with. Yes. You know, you got your internet, you know, you have all of these, income out income in happening with these industrial type situations like the storage facility, you really have low income going out, more income coming in.

Yeah. they're easy management and, you know.

Yeah. So basically lower, lower, lower maintenance is the main thing. So it's kind of like less hassle, lower maintenance. You're you're basically the building is more simple. And how it was constructed. And basically once you're renting them, you're right. There's just there's less hassle all around. Yeah. would you say that, if you're managing a facility like that, what's the percentage of, like with apartments?

You're going to do one year leases? Almost always with most of these storage facilities. Are they doing, month to month or are they mainly doing year contracts? Six month contracts, just like residential.

You're we're seeing a lot of like six month, two year contracts, you know, some do you have month to month. Yeah. But I don't know that, you know, those are a little bit less predictable. Yeah. When you set it up that way, you know, it's nice to kind of feel your occupancy and have it just be steady.

these the facilities that we're building and designing. You know, my brother Grant, kind of come up with a lot of the concept, and they're they're going to be a lot more modern, contemporary. You see a lot of the storage facilities. They just look like, you know, a yard with big containers. Yeah. You know, so this is going to, you know, it's a little different take on it.

You know, having a mix of self-storage along with boat and RV and, you know, covered parking. Some have uncovered parking, you know.

So the bigger project that you've referenced a couple times that you're listing just real quickly, let's plug that. Yeah. So what do we have out there?

at the I-5 industrial center off Grandview. we've broken ground on our first locked storage that is going up, and it's going to be a mix of self storage along with RV boat storage. All smart access, really, you know, slick, modern, contemporary design, which, you know, we have some imagery to share. and yeah, so those that's going to be listed out there, some of the development that my dad developed years ago and we've had we've all had businesses out there, all my siblings, and we held on to one of the properties, and it's right on the I-5 corridor close to the border.

So it's kind of a great first launch and a great, access point for something like storage, you know, easy in and out right off I-5 with the 360 degree road that turns around big trucks, RVs, boats can easily maneuver in there.

And and that's going to be that's a that's that's going to be wet. And 1112 13 million something like that range.

Yeah 12 and half to 14 okay okay.

And then and that's and that's how much, how much how many storage unit I mean it's.

That's a that's for an entire storage facility.

You started it.

All. You know it's obviously a larger investment.

Yeah.

And obviously you know yeah. You know you have you have a lot of buyers out there for that in some areas and maybe not. So yeah.

Yeah

So if you invest in storage units, whether you invest in an entire project. Yeah. Like what you guys are listed or an individual storage unit and then you rent that instead of if it's not just for yourself, maybe you end up. The nice thing is, is if somebody doesn't pay their rent normally with like an apartment or a condo or a house, that somebody doesn't pay their rent, you know, with all of the rules around personal property and things like that, you're evicting them.

You're dealing with all that with a storage unit. Once they haven't paid their rent for a certain amount of time, you get to, auction off, you know, what's in the unit like that? Like that TV show on, I don't remember the storage wars or anything like that. What the show is. Yeah. And maybe, you know, maybe you can strike gold with, with that if you if you, if you buy it, invest in these.

So a little added extra. Yeah. Bonus of profit.

If the worst case scenario.

Is case scenario you're not. Yeah.

Yeah.

So the last thing I want to touch on is land. So if somebody is interested in developing, building their own storage unit or a storage or, or building any sort of storage unit or development industrial development for investment purposes, what can you share with us on that?

Well, what's really exciting about this whole process that I've been in and working with my family and my brother, you know, on these projects is there's this amazing team of guys that have introduced me to all kinds of new and upcoming algorithm technology. There's a lot more that goes into that when you're looking for, you know, the right property.

We have now software that we research, as far as you know, the net rentable income for that area, the square foot per capita. And all of these factors are play a role into where are you going to get your best, ROI return on investment per the area? Where is the best place to actually build per you know, whether it be an industrial commercial space?

and so now, you know, we have a lot of access to that and being able to really nail down the right property that's going to bring the best and highest use of business and consumers to that area. Per it's entire location. demographics, that kind of thing.

Yeah. So like everything from like, what's the competition to okay, this location and yeah, it would make more sense to do more RV and boat store boat parking versus, you know, mezzanine, you know, bigger storage units, kind of analyzing every element of that and then what your construction cost could be in order to sell, make a pencil out and all that kind of stuff.

Yeah. And also, yeah, it allows you to really plan the entire process. And, you know, also some areas are going to be very much especially in urban, you know, Seattle areas are going to be very zoned towards, you know, we're more interested in producing jobs for people in this area. So they're not going to want it's going to be a lot harder to break ground for a storage facility in that kind of place.

That makes sense. That makes sense. They're going to be more interested in more commercial uses, like true commercial uses, and not.

Just providing jobs that will provide jobs.

Absolutely. That makes sense. So you got to find, even if it's zone that way. Yeah. The county or city may not be specifically very friendly about wanting to help you. maximize the space though. Yeah that makes sense.

So these ratios also play a role into that best scenario outcome. Okay. Now we're going to meet with the city and get that approval you know. Yeah absolutely. Whether it's worth the time that it takes to do that or move on to the next.

So I love it. Okay. So whether you're interested in, just a storage unit or developing or maybe even investing in a major project like the one you are listing, you can reach out to Alicia. Thank you for joining us, Alicia. Thank you for watching. You're listening, you guys. Cheers.