[larrys]

I'd be curious where you are getting that narrative from. It differs from what I am familiar with for sure in terms of knowledge of this industry. Not that that's not the play of some REIT's (or what they say they are doing but not really doing) of course but I wonder how many of the locations fall into that category vs. just "after a certain point the money essentially prints itself". Which sounds pretty good. [1]

(What you are saying is typically done though with parking lots in cities for sure for various reasons.)

"and you still have control of a massive chunk of land to boot"

Unless you have land in a particularly valuable location the fact that there is a building on it is going to contradict having someone purchase it for development purposes. It's being used. In other words "nothing to see here move along". And if it was in a super valuable upcoming area that would already be priced into the land cost and might be prohibitive.

I'd also would like to know what the time frame is for something like this to actually happen and how many times it has actually been done. That is, out of the entire self storage industry, how many locations (multi level for example - those larger buildings) have been raised for a higher use (with every tenant thrown out)? And something else built on the land which generates more revenue. Where a comparable piece of empty land was not available?

Of course it might be something that the REIT says marketing wise in order to enhance the appearance of the value of their properties. But to me it seems that the reality of whether that would actually happen (and how often) might be entirely different.

That said any links to this would be nice if you can pass along.

[1] For self storage that I am also familiar with they predictably raise the price every year. And it's not easy to move things out (you need a truck or you need to dispose of something.)

[ldd-]

It's relatively common practice - buy RE as a speculative investment and hold hoping that it will grow in value as an area develops.

In the meantime, it would be great to have the property throw off some free cash flow, so developers build businesses on the property that involve highly generic structures that are easy to build (low investment) and easy to demolish - otherwise, the cost of demolition for any prospective buyer will reduce the value they are willing to pay for the land.

Common businesses for this purpose are parking lots/garages and storage. When you see those, it's pretty safe to assume the owner is trying to maintain as much option value as possible in the property.

Once you build a specialized structure, you lose option value on the property.

[itbeho]

I've seen one self storage facility in my town removed in favor of a commercial medical plaza recently.

Self storage buildings around here are just cheaply built steel buildings. They are easy to dismantle.

[larrys]

There are those for sure. Separately I know of a 155 unit residential condo complex in Florida that is being torn down to build a high rise (resulting in 4x value to unit owners the market is so hot right now).

But then there are these examples which seem highly unlikely as the investment play involved. Browse the links on this (a typical larger storage company site) and you will see nobody is putting up a building multi story (with elevators) and hundreds of tenants with the intent of holding it to tear down. Not that like anything it couldn't be torn down if the right opportunity came along.

http://www.publicstorage.com/

http://ir.extraspace.com/phoenix.zhtml?c=180054&p=irol-irhom...

But hard to believe that is actually the business model they are relying on although it could of course be a future upside.

[coldtea]

>Unless you have land in a particularly valuable location the fact that there is a building on it is going to contradict having someone purchase it for development purposes. It's being used. In other words "nothing to see here move along".

Huh? It's not like the way those things are sold is people driving around and searching for empty lots.

The owner actively seeks to sell it, and he (or his agent) negotiates with prospective buyers who might not even have visited the location at this point, just look for something in that area.

The fact that there's a building (the garage or self storage) on the location so "it's being used", doesn't matter at all as to whether there will be buyers for it.

Heck, buyers investing in upcoming (development/price wise) places are known to buy and demolish existing residential buildings and established business to build their new stuff (an office building, a mall, a skyrise, etc) -- a parking lot is nothing compared to that.

And it even comes with a single owner to negotiate with, as opposed to buying several different residential buildings to build on.