Arctic Self Storage
Keystone Development built and operated Arctic Self Storage, the largest self storage facility in Anchorage, Alaska with over 200,000 square feet of indoor storage and two acres of outdoor storage.
Keystone Development built and operated Arctic Self Storage, the largest self storage facility in Anchorage, Alaska with over 200,000 square feet of indoor storage and two acres of outdoor storage. The project is located in Fuller Industrial Park, a 40 acre light industrial park in the midtown area, a few miles from downtown Anchorage.
We built it in about a year and filled it almost immediately at great rates compared to the cost to build. We learned a lot about dealing with tough soil conditions. The land was 24 feet of peat which needed to be either dug out or compressed with sand. Our smallest storage unit was 5 ft wide x 8ft deep x 10ft high which we rented for $40 per month. We had demand for a smaller unit so we decided to make these into two units by cutting the doors in half and putting a floor in the middle giving us 5ft x 8ft x 5ft units that we rented them for $28 per month. It was nice profit for a small investment and it met what clients wanted/needed.
Unfortunately the property owner was not willing to sell the land for this project. Instead they gave us a 99 year ground lease and the lease rate was updated every five years based on the then current assessed value determined by the Anchorage Municipal Borough. At the time self storage facilities were very difficult to finance. Banks couldn't sell loans on these types of properties into the secondary market because they had operating company characteristics, not a traditional real estate deal. We were able to do the project because the land was leased and we had enough excess cashflow from our other investments to secure the construction and take out financing.
After the first five year lease rate readjustment it was clear that the tail would wag the dog; every five years the cost of the lease went up even though the market rents did not necessarily increase as well. We decided to take our profit and move on to only projects where we owned the land and buildings. This was the first and last project Walsh Investment Company ever did on leased ground.
In hindsight, the self storage concept was a very was a successful business model that we should have replicated to other locations.