Appraisals on Portable Self Storage Units that are tied down per City Ordinance

[TxLuke]

**Portable Storage Units and Appraisals***

Looking for suggestions regarding Portable Storage Containers at a Storage Facility being considered in the appraisal evaluation.

The scenario is Portable Units will be installed on the adjoining self storage facilty land owned by the facilty and has stabalized gravel/crushed concrete. This will be completed in 3 weeks. The units will be tied down and secured as per the City Ordinance. These are 8x20 buildings. The bank has agreed to have appraiser do an AS PROPOSED appraisal since we do not close on the refinance until 60 days.

Here is what the Bank came back with.

"The Appraisal Department and Appraiser both agreed that this would be considered personal property rather than real property due to the units not being anchored to a concrete slab. The storage containers could be un-staked and removed from the site.........understand that if its classified as personal property in the appraisal then we can’t include it in the loan calculation with the other real property improvements."


Here are some of my supporting points

Portable Storage Units are income producing units.
Storage Facilities are usually valued on NOI.
The Portable Outdoor units will be tied and achored down as required by the City.
These Units weigh over 3,000 pounds.
Cannot be moved easily, especially with customers items in there.
I have seen them included on other appraisals
A nationwide bank as a regular practice lends facilities that have these portable units.
RV and Boat uncovered storage facilties that have no covered buildings and just a fence and access gate are valued on NOI even though, there is no real property.
The RV or Boat could leave the premised and there goes the income.
If and RV or Boat Facility had covered carports, they could also be dismantled and used elsewhere.
Some whole facilities are made of portable type of units and sold as a facility
Pier and beam houses are technically not on a concrete foundation but are considered real property by the lenders, insurance companies, city inspectors and appraisal districts.


Thanks In Advance

 

[Thomas Holding]

Possibly try to determine how much of the rental income from these units is attributable to the land they are placed on since you are valuing the real estate only.

 

[TerryRohrer]

I agree with the bank and their appraiser. These appear lighter and easier to move than shipping containers, and those are constantly on the move. Similarly, there were tens of thousands of mobile units in man camps in North Dakota during the oil boom, and those are now gone, even though they would have been anchored while in use. The bank understands they will generate income as long as they are there, but will not if removed in the night. The uncovered storage argument is not compelling...if there is demand for those spaces, when one leaves another comes. Lacking that demand, there is no NOI and no value. I understand your plight, but if I were loaning my money, I would not give these units any credit as collateral! Good luck!

 

[TxLuke]

Possibly try to determine how much of the rental income from these units is attributable to the land they are placed on since you are valuing the real estate only.

Thanks

 

[TxLuke]

I agree with the bank and their appraiser. These appear lighter and easier to move than shipping containers, and those are constantly on the move. Similarly, there were tens of thousands of mobile units in man camps in North Dakota during the oil boom, and those are now gone, even though they would have been anchored while in use. The bank understands they will generate income as long as they are there, but will not if removed in the night. The uncovered storage argument is not compelling...if there is demand for those spaces, when one leaves another comes. Lacking that demand, there is no NOI and no value. I understand your plight, but if I were loaning my money, I would not give these units any credit as collateral! Good luck!

Thanks

 

[KHS445]

As others have said these types of units are considered to be personal property. I would suspect that the reason for using this type of unit for a self-storage facility is three fold; initial purchase and installation costs are less than more permanent structures, can easily be removed and most likely be installed elsewhere should a higher and better use of the subject property become apparent, and due to their being considered personal property the tax depreciation schedule is significantly reduced. Don't quote me but if memory serves me correct if permanently secured to real estate the depreciation schedule would be something like 29 years and if personal property it would be around 7 years. The difference can shield a lot of income for the initial developer.

Years ago a bank customer of mine used converted storage containers to develop a self-storage facility on what at the time was basically useless land. His primary reasons were cost and the accelerated depreciation schedule. He has since passed away and his son is contemplating removing the containers and developing the property.

 

[Deleted member 152047]

Personal property, but it doesn't mean that you cannot value the personal property if you are competent and they want the value. You are on the right track with looking at it from an income perspective.

Be careful with your economic life and capitalization rate determinations for that component. You may account for replacing some of the units every X years, which would allow the operation to continue indefinitely.

 

[Terrel L. Shields]

initial purchase and installation costs are less than more permanent structures, can easily be removed and most likely be installed elsewhere should a higher and better use of the subject property become apparent, and due to their being considered personal property the tax depreciation schedule is significantly reduced.

You might have an increased amount of depreciation- that's a CPAs decision. I would bet one real big factor is what you mean about HBU. Many times a property that had not ripened into a HBetterUse yet, might build storage buildings to generate income awaiting a higher and better use....an interim use if you will.

Yes, I'd compare the real property buildings and cost to the land cost and allocate the rents that would apply to the land, then apply to the land under the portable units and value those as a separate line as "personal property".

 

[Scott.A]

The units are definitely personal property, so standard mini-storage is out the window. You might find some similar sales, but they will be few and far between. I'd be looking for other outside storage for comparison, then rely heavily on the income approach. You can probably do cost approach on the prepared land to go along with it.

 

[Mike Kennedy]

"tied down" vs "permanently affixed to the site. "