RECENT RV STORAGE OPPORTUNITY
November 30th, 2013
Background
Upon the closure of the El Toro Maine Base in Orange County in 1999, the existing landing strips were turned into the nations largest RV storage lot, with 2500 RV’s parked on the runways. A sorely needed commodity in the Orange County area, since the high cost of land made it unfeasible to allocate 2 million dollar an acre land for the storage of RV’s
In 2005 Lennar Corp purchased the closed El Toro Marine Air Base for 650 million, with the idea to develop 10,000 homes and 2 million sq ft of commercial / industrial property. In 2009, the idea was put on hold during the economic down turn. The City of Irvine received about 200 million from the developer to partially fund the Great Park Project.
Governor Brown, again due to the economic downturn, stopped all funding (formally 1.4 billion) that was earmarked for the Great Park project.
In 2012, it seemed the economic recovery was under way, and Lennar and Five Point Communities, a sub set of Lennar Corp, renewed their plans and pushed forward with development.
Early in November, 2013 All Star Services the operator of leased land held by the City of Irvine and Lennar Corp / Five Point Communities, gave their 30 day notice that they would no longer manage the 2500 space RV storage lot located on the old abandoned El Toro Air Field . The monthly lease amount paid by All Star Services was $147,000 per month. This covered about 60+ acres, mostly on the old airport runways. The 30 day notice takes effect December 1st, 2013
On November 27th, 2013, the City of Irvine gave Lennar Corp and Five Point Communities approval to build an additional 4600 homes in exchange for Lennar to complete the Great Park project also located on the runways. Great Park Approval details here.
Video -
The complete video of the Nov 27th city council meeting that includes the discussion of the RV storage issue can be found here
The Problem / Opportunity-
While the above seems at first blush to be a typical land acquisition, there are some inherent problems.
Problem #1 - All Star Services contractually had an obligation to give 30 days notice, which they did, not leaving the City of Irvine much chance to react. There are few people willing to take on such a huge monthly debt with only a few months left before the Great Park evicts all the RVs. They are trying to move the contact to another company, partially owned by All Star, with a reduction in rents of $70K per year. The City council is taking a dim view on this. The transferee of the contract is not likely to accept the assignment without the required terms modification. It is a real quandary.
Problem #2 - The 2500 RV’s are all parked directly in the path of the Great Park Project development. At best, the life of the RV storage is reported to be about 6 months.
Problem #3 - As of November 27th, the City of Irvine gave the development of the Great Park to Lennar, since there were no other funding sources. The RV’s are directly in the path of the Great Park Project.
Problem #4 – There is income of $147,000 a month that may go out the window.
Problem #5 – Where are the 2500 RV’s going to go?
Feasibility of Orange County RV Storage
Below is a brief feasibility study on what the R.O.I. could be if you built a new open storage facility. Open means no covers or buildings. Simply a large paved parking lot.
Land cost $1,500,000 per acre
RV’s per acre 40
Acres required to store 2500 RV’s 62,5 acres
Base cost to acquire land $93,750,000
Down payment $18,750,000
Loan amount $75,000,000
Payment @ 4.5% 20 years $474,483 Per month
Income 40 RVs per acre @ $200/month $500,000
Potential profit $ 25,517
R.O.I. 5.1%
Oops. We forgot to improve the land. Grading, paving, fire, walls, lighting, staff,
security, insurance, taxes, permits, licenses etc.
Figure about $6.00 per sq ft (very conservative figure) 2,722,500 sq ft = $16,335,000
Well there goes the R.O.I.
We used a very conservative number at 1.5 mil per acre purchase price. Reality dictates where are you going to find that much acreage in Orange County at any price?
The point I am trying to make is that it is nearly impossible to make sense of RV storage in the Orange County market place at just about any level, unless you can find property or leaseholds at well below market price.
So, what is going to happen to the RV storage market once these RV’s are asked to leave in the next few months, or sooner?
The obvious answer is the rental rates for available RV storage will increase significantly.
There is very little supply for Orange County RV storage except for those companies that managed to find large warehouses to convert to temporary storage until the lease market improves, which it is. RV storage is not the highest and best use for expensive Orange County real estate, but in the short term, it does provide revenue for those distressed buildings. Many of these RV storage lots are merely “Land Banking”, waiting for the opportunity to sell once land values increase, which they are doing now.
I think most of the storage opportunities will be in the outlying areas of Riverside, LA, and San Diego counties, where land is cheap enough to justify its use. Still, in talking to operators of existing facilities, they are all poised to raise rents the moment the RV’s in Orange County are given their walking papers. Those RV’s have to go somewhere.
New construction of RV storage will certainly be in the cards, but construction loans for development for specialty projects like RV storage are very difficult to get, virtually impossible for small developers. Anyone owning / storing an RV in Southern California is in for some real sticker shock.
Enter the RV Storage Condominium Concept
Eucalyptus at Beaumont is a Storage Condominium solution with 107 enclosed garages built on 4.5 acres in Beaumont California. We are perfectly poised to capitalize on the recent developments in Orange County.
Each garage has its own lot, and is individually owned. Ideal for the entry level investor seeking a financial advantage in the soon to be hot RV storage market.
We built this project to be a high end storage facility, unlike anything built anywhere. Some may say over the top. A 2700 sq ft designer decorated clubhouse, complete with laundry facilities, showers, WIFI, lounge area, kitchenette. For the RV owners, we have 71’ approaches to the garages, with all door heights at 14’. All garages are 50’ deep. RV specific amenities include, individually alarmed garages, 2 dump stations, pressure washers, a 2500 sq ft wash area, and all your needed cleaning supplies.
All of these amenities add up to a higher rental return on your investment, and long client retention.
We do have financing available for investors, with rates as low as 4.75% with a minimum of 20% down. You can find a list of lenders here
Our current prices for our storage condominiums can be found here
In general, our 13’ wide x 50’ deep enclosed garages are renting for $399 per month. At present, we only have one available for rent. Rental listings can be found here
Units rent very quickly as the supply is limited.
There have been no re sales of any of our garages to date.
Project Specifications
Project area 4.5 acres
Number of garages 107
Occupancy as of 12/1/13 85%
Total under roof sq footage ` 80,000 including clubhouse
Project completion 4/09
Construction Metal
Drives Concrete
Security 16 cameras, web enabled
Security gates 2 – 25’ wide
Drive width 71’
Door heights 14’
Sewer City
Zoning Industrial
HOA dues $35 per month
Health of HOA Approx $80,000 in reserves
Property tax rate 1.4%
Electrical 1200 amps, SCE
Meters Private sub meters
Existing loans None
Title insurance Fidelity, builder provided
Landscaping Extensive
Lighting 32 - 150 watt wall packs
Type of storage 90% RV owners, 10% car storage\
Contact Information
Developer – Ted Deits
Eucalyptus at Beaumont
671 E 3rd Street
Beaumont CA 92223
714-280-4201