Realtors Using Proforma #'s When Listing Storage

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09 Feb 2012 11:21 #1169 by ams
ams created the topic: Realtors Using Proforma #'s When Listing Storage
A few years ago, I wrote an article about self storage developers selling new developments in areas that were over built by only listing a few storage facilities in areas where there are many. I found out about this when a developer came in to do a site survey and he only had around 10 facilities listed and shown on a map for the city of Stockton, which really has closer to 60 facilities. When asked, the developer stated that they just put the important facilities on the map.

I think we are starting to see the fruit of that now with some of the realtors trying to sell some of the properties.

They are trying to exaggerate the facility by using proforma income numbers. Proforma numbers are the "Gross Potential Rent" which would be the amount taken in by a facility if 100% of the units rented at the standard rent price. $95 standard rent on a unit that has a market price of $29 looks great for the proforma numbers but really not real life.

I was looking at a listing that was showing some decent income that would have been around 40% to 50% more than the loan payment, then I noticed off to the side the listing, the realtor stated that the income was proforma. Actual income was quite a lot less, making the loan payment almost 95% of income.

With 4 facilities within sight of each other trying to get the proforma income would be impossible. Especially when standard rates are elevated with the knowledge they will never be received.

Some realtor's make the listing with the terms "poorly managed" stating the reason for the facility failing to make the proforma income was the manager's fault. Never mind that within a 1 mile radius there are 9 facilities.

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09 Feb 2012 13:16 - 09 Feb 2012 13:16 #1173 by dirkwood
dirkwood replied the topic: Re: Realtors Using Proforma #\
.....and thats how we constantly are getting fooled with figures.
Not only there but everywhere !!!!!! :huh:
Last Edit: 09 Feb 2012 13:16 by dirkwood.

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07 Jun 2014 07:57 #1812 by ams
ams replied the topic: Re: Realtors Using Proforma #\
The facility I mentioned in the first post did get sold, but within the year it was on the market again.

Not sure if it is bank ran yet, we have had a few facilites in town that were bank run.

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01 Jul 2014 22:02 #1826 by storagealert
storagealert replied the topic: Re: Realtors Using Proforma #\\
Depends on your state in terms of the real estate agent's duty of candor, also who the real estate agent is working for (you, the other side, or both).

This is a commercial transaction so the idea that "they have a duty to disclose defects" is not accurate. There is normally no duty for a commercial seller to disclose but there is always a duty not to lie or deceive (expressing a "half truth" or otherwise misrepresenting things). The pro forma and the scenario you describe seems deceptive and outside the ethical standards any state that has standards for agents. All states as far as I know observe common law fraud and half truth doctrines.
I wouldn't do business with them and if they deceived you and you lost out - suggest you review with a real property attorney. regards, Dale

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02 Jul 2014 11:31 #1828 by ams
ams replied the topic: Re: Realtors Using Proforma #'s
I was not the one who purchased the facility. I was just in the preliminary phase of looking at the possibility of becoming an owner. However once I saw the income numbers were proforma, I knew it was not right.

I have been in the industry for over 20 years and I am friendly with a lot of the facilites in our area, I knew this newer facility was not poorly manaaged as was claimed on the brochure. I would have hired the manager that was working there to manage one of the facilities I am over in a minute if we had the opening.

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