Capital Markets and Financing State of the Industry

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1 New Mexico Self Storage Associa;on Capital Markets and Financing State of the Industry Presented By: Neal Gussis Principal CCM Commercial Mortgage

2 Agenda 1. Self- storage as an Asset Class 2. Capital Markets Overview 3. Lending Landscape for Self Storage

3 My Background CCM Commercial Mortgage is a bou;que mortgage brokerage firm specializing in securing market- driven financing alterna;ves to self storage and commercial real estate owners na;onwide Direct Lender and Mortgage Broker since 1993 with a specialty in self storage finance Have secured over well over $2 Billion in self storage and in past 12 months closed $181 Million in self storage loans na;onwide Die Hard Cubs Fan

4 Self- Storage As an Asset Class REITs, leading industry sophis;ca;on - Peak occupancy, Peak stock values Investor demand outweighs supply Cap- rate compression is leading to higher valua;ons for all self storage proper;es Ability to obtain return of equity either through refinance or sale Development of new supply is in process Opera;onal exper;se and sophis;ca;on is increasing at fast pace. New Mexico markets somewhat insulated from REIT advancements.

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8 Has livle or no effect on self storage economics, with minor excep;on to REIT prices Vola;le markets cause CMBS rates to be subject to change before loan closing Short term rate increases will cause variable rate loans and bank fixed rate loans to rise

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10 United States Germany Japan France Hong Kong Spain Italy Britain Portugal Brazil India Greece Country 2.13%.59%.33%.90% 1.65% 1.95% 1.75% 1.67% 2.59% 15.93% 7.72% 8.31% Rate As of September 22, 2015 Bloomberg

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12 1. Self- storage - desired asset class across funding sources. 2. Debt for Self Storage Majority are Banks and CMBS 3. Credit Loosening, More Aggressive Terms 4. Banks - Seeking New Customers, Keep Exis;ng Customers 5. Banks - ConstrucCon loans - available - selec;vely 6. Conduits - Best op;on for cash out 7. Other Sources - Life insurance, credit unions and private lenders

13 Banks Best For: Term Rates Amor;za;on LTV Debt Service Debt Yield Recourse Prepayment Cash Out Stabilized Proper;es, Expansions, Construc;on 3, 5, 7, 10, 20 oden ;mes with rate resets Fixed or Variable Typically years Up to 75% 1.25 N/A Recourse, Par;al Recourse, Non Recourse Most ;me sliding on fixed, open on variable Usually likes borrowers to have skin in the game

14 CMBS Best For: Term Rates Amor;za;on LTV Debt Service Debt Yield Recourse Prepayment Cash Out Stabilized Proper;es, no expansion 5, 7 and 10 Years Fixed 30 years, IO periods Up to 75% % and up Non- recourse carve outs Defeasance or Yield Maintenance Yes, evaluated case by case

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16 Life Companies Best For: Term Rates Amor;za;on LTV Debt Service Debt Yield Recourse Prepayment Cash Out Larger, Newer Proper;es, Strong Sponsorship, Lower Leverage Up to 20 Years Fixed years Usually under 65% 1.30 N/A Non- recourse carve outs Varies Yes, evaluated case by case

17 Other OpCons Credit Unions SBA 7A and 504 Credit Companies, Public and private funds, mortgage REITs Bridge Lenders Value Add and Hard Money

18 10-Year Fixed Rate CMBS 10-Year Treasury Swap 10-Year Fixed Rate Life Company Price based on various matrices 5-Year Fixed Rate Banks Usually based on bank s cost of funds Can also enter a SWAP agreement Fixed-Rate Pricing (As of September 22, 2015) Index + Spread Rate 2.14% % to 3.30% 4.45% to 5.44% 3.75% to 4.50% 3.50% to 4.50%

19 Variable-Rate Pricing (As of September 22, 2015) Index + Spread Rate 30-Day LIBOR 0.21% % to 3.50% 2.21% to 3.71% 90-Day LIBOR 0.34% % to 3.50% 2.34% to 3.84% Bank Prime 3.25% + 0% to 2.00% 3.25% to 5.25% 11 Dist. Cost of Funds.64% % to 3.25% 3.14% to 3.89% ** Variable-rate loans usually have no prepayment penalty.

20 Get to know your lender and its loan- program requirements prior to sending in a package. Be in agreement with financial partners on the financing objec;ve. Be realis;c. Prepare a complete electronic loan request to present to lenders. Be pa;ent with lender s credit ques;ons, and be responsive. Shop the market and nego;ate important terms. U;lize mortgage brokers

21 Self Storage - This may be the best ;me yet to be in the self- storage industry. Increased Values - opportunity to sell or refinance Construc;on Financing - Is back for qualified sponsors and projects. May create isolated supply pressures Self Storage Management - Changing, can you compete? Interest Rates remain low What s next..??

22 Neal Gussis Principal CCM Commercial Mortgage Office: Cell: