SBA 504 Self Storage Feasibility Study in California

Very large loans, and a wide cancellation range

California's SBA 504 self storage loans are about twice as large as the national norm: the median of $1.9 million is 2.10x the nationwide 504 typical, and the bulk of loans runs from $927,500 to $3.4 million. SBA recorded 71 loans worth $157.7 million. California is second among states by count, though self storage is only 14th of 39 among its own asset classes. Franchise ties are almost nonexistent at 1.4%.

Cancellations on California storage approvals up to FY2024 reach 18.3% at the least, and as many as 26.7% once undisbursed approvals are counted. Building a storage facility in California takes time, and approvals that wait for entitlements and construction financing can lapse. The early funded cohort has 33 loans and no charge-offs, reading 0.00% on both measures. That is a floor, and the newest approvals have not yet had time to season.

Lenders and counties

$47.2 million across 18 loans is the footprint of The Mortgage Capital Development Corporation here; CDC Small Business Finance Corp. follows with 11 loans and $23.7 million. AMPAC Tri-State CDC, Inc. holds 10 worth $35.7 million, a very heavy average, Greater Sacramento Certified Development Corporation 6 worth $7.4 million, and Bay Area Employment Development Company 5 worth $12.4 million. These are the holders SBA lists, not an assessment of any company. Sacramento County has 8 loans, Riverside 7, San Bernardino 5, El Dorado and Los Angeles 4 each, and Calaveras and Contra Costa 3 each.

Approvals peaked at 13 in FY2021, with $25.3 million, and fell to 4 in FY2024. In SBA's coding there is no slot for RV or boat storage, which lands in self storage or other warehousing, so the figures cannot separate vehicle storage from ordinary storage units.

What a California storage study must test

Entitlement comes first: zoning, environmental review and local opposition can add time and cost, and a high cancellation ceiling suggests projects often do not reach funding. The study should show the status of approvals, the construction schedule and the contingency in the budget. Demand should be tested in a tight radius with existing facilities, their occupancy and the rents per square foot of climate-controlled and standard units. Model a long lease-up with the loan payment covered during it, and reconcile construction cost with the appraised value of a property whose land cost is high. Show how sensitive the project is to interest rates and to a competing facility. With loans this large, a lender will want evidence of the sponsor's equity and experience.