Self-Storage Feasibility Study Case Study: An SBA 7(a) Acquisition of a Stabilized 262-Unit Self-Storage Facility in Cañon City, Colorado, That Is Not Feasible as Listed Under SOP 50 10 8.1

A 28,755 NRSF, 262-unit independent self-storage facility on 2.16 acres at 1628 Cedar Avenue in Cañon City, listed in 2026 at $2,880,000 on trailing-twelve-month net operating income of $215,405, a 7.50 percent cap rate, with 96 percent unit occupancy and an owner-operator in place. Financed at 90 percent under SOP 50 10 8.1, which tests an initial acquisition at 1.25x on historical cash flow with no credit for projections, the facility covers its debt 0.68x on a blended 10-year and 25-year amortization and 0.80x on a full 25 years. It clears 1.25x only at a price near $2.0 million on a single loan. Not feasible as listed. Feasible as restructured at $2,250,000, with a 504 loan on the real estate, a small 7(a) loan on the goodwill and 29 percent buyer cash, covering 1.27x on the historical test.

Model study prepared by MMCG Invest | Michal Mohelsky, J.D., FMVA | October 2, 2026

MMCG concludes that the acquisition of Canon Secure Storage at the list price of $2,880,000 is not feasible under SOP 50 10 8.1. At a total project cost of $3,176,000, a 7(a) loan of $2,858,400 at 90 percent and an interest rate of 8.25 percent, the facility's trailing-twelve-month net operating income of $215,405 covers debt service 0.68x on a blended amortization, with the real estate tranche at 25 years and the business tranche at 10 years, and 0.80x if the entire loan amortizes over 25 years. At an interest rate of 9.75 percent, the maximum spread for a loan above $350,000, the full 25-year loan covers 0.70x. The facility would need an economic occupancy of 106 percent to cover a 25-year loan at 1.0x. SOP 50 10 8.1 tests an initial acquisition at 1.25x on historical results, and the income supports a loan of $1,821,337 on a 25-year amortization, which at 90 percent leverage implies a price of about $2,023,708, or a 10.6 percent cap rate, 30 percent below the list price.

The facility supports a different transaction. At a negotiated price of $2,250,000, a 9.57 percent cap rate, a total project cost of $2,546,000, financed with an SBA 504 first lien of $856,000 and CDC debenture of $685,000 on the real estate, a 7(a) loan of $265,000 on the goodwill and $740,000 of buyer cash, or 29.1 percent of the total, the acquisition covers debt service 1.27x on the historical test and 1.25x in Year 1 after a replacement reserve, rising to 1.31x in Year 5. That structure is feasible, conditioned on the seller accepting a price 22 percent below the list price, on the SBA's confirmation of the amortization and special-purpose treatment that the practitioner summaries of SOP 50 10 8.1 report inconsistently, and on a rent and occupancy verification that reconciles the facility's 89 percent economic occupancy to its 96 percent physical occupancy.

This is an MMCG model study: a complete feasibility analysis performed on a real, publicly listed facility using the broker's offering memorandum and public data, prepared to show lenders and buyers how MMCG tests an SBA acquisition against the historical coverage requirement that took effect with SOP 50 10 8.1, and what a feasible restructuring looks like. It is not a client engagement. MMCG has no relationship with the seller, the listing broker or the facility, the listing may have sold or been withdrawn since the offering memorandum was published in May 2026, and the analysis does not represent an offer, an appraisal or a recommendation. The facility's size, unit count, occupancy, income, expenses and rent roll are taken from the offering memorandum and are the broker's figures, which a quality of earnings review would test. The SBA terms in this study are taken from practitioner summaries of SOP 50 10 8.1 that agree with one another; the SBA issued Information Notice 5000-880695 on August 14, 2026 and a technical update under Information Notice 5000-882227 on September 25, 2026. The land allocation, the capital repair allowances, the interest rates, the 504 and 7(a) structure and the replacement reserve are MMCG assumptions. The competitors' rates were read from the operators' own websites on October 2, 2026 where noted. The zoning, the property tax, the owner's transition and the facility's tenant roll were not reviewed and are disclosed limitations.

The Project as listed would operate as an independent, owner-operated self-storage facility at 1628 Cedar Avenue in Cañon City, the seat of Fremont County, Colorado, in the Arkansas River valley south of Pueblo. The physical program comprises 28,755 net rentable SF in 262 units on 2.16 acres, built in 1984: 246 enclosed non-climate drive-up units and 16 open parking spaces, with no climate-controlled units. Per the offering memorandum, the facility is 96 percent occupied by units and 97 percent by area, and its economic occupancy is 89 percent, which indicates discounts, concessions or delinquency of about 8 points. The offering memorandum's rent roll shows a 10 x 10 at $109 per month, a 10 x 15 at $119 and a 10 x 20 at $159. The facility is owner-operated with employees, with a staff of 1.5 full-time equivalents, and the buyer, a first-time storage owner forming an operating company that also owns the real estate, would retain the staff and the seller as a consultant for up to 24 months. The Project is positioned at $109 for a 10 x 10, above every verified competitor street rate in the trade area.

Marketing & Sales Strategy. The buyer would retain the existing tenant base, which is the asset being purchased, and would avoid rate changes in the first year beyond the 1.5 percent growth the model carries. The marketing plan would add online rental and reservation to a facility that is run today by phone and office visit, update the web listing and signage, and rely on the facility's established local referral channels. No B2B channel is built into the facility.

Amenities

The facility is parcel 98804514 in Fremont County, 2.16 acres at 1628 Cedar Avenue, Cañon City, CO 81212. The offering memorandum reports 28,755 NRSF, which is 30.6 percent of the site area of about 94,090 SF, and a year built of 1984. It reports 13.14 SF of storage per capita within three miles and 15.01 SF within five miles, well above the national benchmark of about 7.0 to 7.4 SF per capita, and it states that no new storage developments are known within 30-plus miles, which is a broker claim the study did not verify. The listing's own comparable set averages $100.50 for a 10 x 10, below the facility's $109. The offering memorandum projects 3 percent rent growth and a cap rate that rises to 8.70 percent by Year 4; under SOP 50 10 8.1 projections cannot be used to reach the coverage floor, and the study does not use them. The offering memorandum models 30 percent of the price as goodwill for property tax purposes, which the study uses as the allocation between real estate and business value. The building is 42 years old, and the study allows $95,000 for roof, exterior and paving repairs.

The zoning district and use table were not retrieved. The facility is an existing, operating, served use, and a legal nonconforming status or a variance history, if any, was not reviewed. The Colorado property tax and the Fremont County mill levy were not pulled; the offering memorandum's operating expense line of $108,448 includes a 5 percent management fee, and whether its property tax component reflects a reassessment at the sale price was not confirmed. The Colorado Self-Service Storage Facility Act, C.R.S. 38-21.5, governs the owner's lien, the required rental agreement notices and a late fee safe harbor of the greater of $20 or 20 percent of the rent (HB18-1117), and practitioner summaries read it as containing no provision on the amount or frequency of rent increases. The residential limit of one increase per twelve months in C.R.S. 38-12-702 applies to dwellings and not to storage. Colorado's total price law, HB25-1090, has been in effect since January 1, 2026 and requires advertised prices to include every mandatory fee; the offering memorandum shows $17,460 of fee income, and the competitors disclose administrative fees of $25 to $29 on listing sites. No pending Colorado bill on existing-customer rent increases was found.

The acquisition of an existing storage business is an initial acquisition under Appendix 15 of SOP 50 10 8.1, effective for loans numbered on or after October 1, 2026. The summaries MMCG reviewed agree on the following. Debt service coverage must be at least 1.25x, measured as EBITDA over combined post-transaction debt service on the last fiscal year-end or an average of the last two, historical or adjusted, with no credit for projections, and a rent add-back where the buyer acquires the owner-occupied real estate. A quality of earnings report is required when the business purchase price, net of owner-occupied real estate, reaches $3 million; the price here is below that, and the study recommends one regardless because economic occupancy lags physical occupancy by 7 points. An independent business valuation by a qualified source is required on every change of ownership. Equity injection is 10 percent at minimum, standby seller debt and other limited sources together may supply no more than half of it, and at least 5 percent of the project must come from unlimited sources. Seller debt that is not on full standby counts in debt service. Small Loan processing is barred for any change of ownership, personal financial statements must be no more than 90 days old, every owner of 20 percent or more guarantees the loan, and life insurance on the principal is expected where the business depends on one person. Total debt cannot exceed the supported business valuation. Two points are reported inconsistently. The September 25, 2026 technical update is described by the Coleman Report as permitting amortization of up to 25 years where the buyer acquires both the business and an owner-occupied special-purpose property whose value depends on the business, and by Commercial Lending X as applying where real estate is 85 percent or more of value. One summary names self-storage as an owner-occupied special-purpose example for the projections exception, which conflicts with the CDC guidance that the SBA does not treat self-storage as special-purpose. MMCG shows both the blended and the 25-year results, and the SBA's text governs. Interest is modeled at 8.25 percent on the 7(a) loan (an assumed Prime of 6.75 percent plus 1.50 percent; Prime was not verified at the study date).

Source: U.S. Census Bureau, QuickFacts, Vintage 2025 estimates and ACS 2020 to 2024. United States median household income is $80,734.

The demographics are modest. Cañon City's population is declining, and Fremont County's growth is concentrated in the correctional facilities in the county, which hold roughly one in five of its residents and do not generate household storage demand (Wikipedia, secondary). Median household income is 20 to 22 percent below the national median. The persons per household, the renter share, the persons 65 and over and the housing permit counts were not pulled at the study date and are disclosed limitations. The study does not rely on growth: it tests the acquisition on the facility's own historical cash flow, which is what SOP 50 10 8.1 requires.

MMCG identified six storage facilities within about three miles of the site. Distances for the first three and the sixth are from the offering memorandum; the others were not measured. Rates are 10 x 10 non-climate unless stated and were read from the operators' own pages on October 2, 2026 where noted.

Competitor Number 1 Great Western Storage This facility is located at 3070 E Main Street, Cañon City, CO 81212. Its operator portal shows a 10 x 10 non-climate unit at $100 cash and $103.99 by card, available only on a waitlist, and a 10 x 10 temperature-controlled unit at $115 cash and $119.59 by card, available. The rates are primary-verified.

Competitor Number 2 Dawson Ranch Mini Storage This facility is located at 1730 Mariposa Road, Cañon City, CO 81212, 2.39 miles from the subject per the offering memorandum, and stores RVs and household goods. Its operator page shows a 10 x 10 inside unit at $75. The rate is primary-verified.

Competitor Number 3 Reliant Self Storage This facility is located at 5291 CO-115, Florence, CO 81226, 2.22 miles from the subject per the offering memorandum, and advertises climate control. Its operator page shows a 10 x 10 unit at $75; no separate climate rate is shown. The rate is primary-verified.

Competitor Number 4 North Side Self Storage This facility is located at 1400 South Street, Cañon City, CO 81212 and is listed under 619 Storage. Its operator page shows no 10 x 10 and an 8 x 10 unit at $70 online and $100 in-store; climate control is claimed in the FAQ without a rate. The rate is primary-verified.

Competitor Number 5 Mary's Magazine Self Storage This facility is located at 1945 High Street and 1035 Field Avenue, Cañon City, CO 81212. A listing site shows a 10 x 10 at $65 under a promotion against $104 standard; the operator's own page did not render a price, so the rate is secondary.

Competitor Number 6 Canon City Self Storage This facility is located at 3345 US-50, Cañon City, CO 81212, 2.65 miles from the subject per the offering memorandum. The offering memorandum's comparable set shows a 10 x 10 at $100; no operator website was found, so the rate is secondary.

A listing aggregator shows storage rates in Cañon City from $54. No facility under construction or approved within three miles was identified; the offering memorandum states none within 30-plus miles.

The facility's 10 x 10 rate of $109 is above every verified competitor street rate. The verified rates are $75 at Dawson Ranch and Reliant, $100 to $103.99 at Great Western, whose non-climate 10 x 10 is available only by waitlist, and $104 standard at Mary's Magazine before its $65 promotion. The subject's rate is 45 percent above the $75 operators and 9 percent above Great Western. The only supply the market lacks is climate control, which Great Western prices at about $15 above its non-climate rate and has available, and the subject has none. The study therefore concludes that the facility's in-place rents are at or above market and that no revenue-management upside is available in the base case. Economic occupancy of 89 percent against physical occupancy of 96 percent means that 7 points of the facility's rent roll are concessions, delinquency or vacancy by area, which the buyer inherits.

The study carries the offering memorandum's income as the historical base: rental income of $306,394 at 89 percent economic occupancy, or a gross potential rent of $344,263, plus $17,460 of fee and tenant insurance income, for effective gross income of $323,854, or $11.26 per NRSF, and operating expenses of $108,448, for net operating income of $215,405, or $7.49 per NRSF. The pro forma grows gross potential rent 1.5 percent a year, other income 2 percent and operating expenses 3 percent, and holds economic occupancy at 89 percent in Years 1 and 2 and 90 percent thereafter. The offering memorandum's 3 percent rent growth and rising cap rate are not used.

Location: 1628 Cedar Avenue, Cañon City, CO 81212 Size in SF (Gross): 28,755 (net rentable; gross building area not published)

Source: Marshall & Swift CoreLogic, MMCG

The price of $2,880,000 allocates $380,000 to land, $1,636,000 to the buildings and site improvements and $864,000 to business goodwill, using the offering memorandum's 30 percent goodwill allocation. The remaining $296,000 of the total project cost is closing costs, capital repairs, working capital, lender fees and the valuation and appraisal.

Loan Assumptions, As Listed

On a full 25-year amortization the coverage is 0.78x, 0.79x, 0.81x, 0.81x and 0.82x in Years 1 through 5, and at 9.75 percent the T12 coverage on 25 years is 0.70x. The facility does not cover its debt on any amortization.

The facility would need an economic occupancy above 100 percent to cover a 25-year loan once. The price of $2,880,000 is not financeable at 90 percent under a 1.25x historical test.

The facility supports a transaction at a lower price and a different structure. At a negotiated price of $2,250,000, a 9.57 percent cap rate and $78.25 per NRSF, the buyer finances the real estate with an SBA 504 loan, the owner-occupied structure for which the 504 program is designed, and the goodwill with a small 7(a) loan, with the buyer funding the balance in cash. The allocation of 30 percent to goodwill is retained, so that the price allocates $297,000 to land, $1,278,000 to buildings and site improvements and $675,000 to goodwill. The qualified source's business valuation and the appraisal must support the price and the allocation. The CDC must confirm that an acquisition of an operating business by a newly formed operating company qualifies for the 10 percent borrower contribution and not the 15 percent that applies to a new business or a limited-purpose building.

Location: 1628 Cedar Avenue, Cañon City, CO 81212 Size in SF (Gross): 28,755 (net rentable; gross building area not published)

Source: Marshall & Swift CoreLogic, MMCG

Loan Assumptions, As Restructured

The real estate side of the project, $1,713,000, is financed 50 percent by the first lien, 40 percent by the debenture and 10 percent by the buyer. The business side, $833,000, is financed by a 7(a) loan of $265,000 and $568,000 of buyer cash, which is 68 percent cash on the business side, because the 10-year amortization of a 7(a) goodwill loan is what the historical test cannot carry.

The Year 1 operating budget of $111,701 is the offering memorandum's $108,448 grown 3 percent, and net operating income of $217,098 rises to $227,338 in Year 5 on 1.5 percent rent growth and 2 percent growth in other income. The historical test is 1.27x on the T12 net operating income and 1.25x in Year 1 after a replacement reserve of $0.20 per NRSF, which is appropriate for a 42-year-old facility.

The restructured acquisition holds coverage above 1.0x in every case. The single-factor cases cluster between 1.16x and 1.18x, except a new competitor holding economic occupancy at 80 percent, which produces 1.06x, a thin cushion that reflects a facility with no rent upside. The 29 percent buyer cash requirement is the price of a stabilized facility whose price assumed a 7.50 percent cap rate in a market where the 2026 transaction average is 6.59 percent for institutional product and 6.5 to 8.0 percent for secondary and tertiary private trades. A structure with a larger seller concession and less buyer cash would not clear the historical test.

The determination of not feasible as listed stands on the evidence above and is not conditioned. The determination of feasible as restructured is subject to the following conditions precedent:

The following items could not be verified from a primary source at the study date and are disclosed: the SOP 50 10 8.1 text, which is taken from practitioner summaries; the listing's status; the offering memorandum's figures, which are the broker's; the land allocation; the zoning district and property tax; the rates at Mary's Magazine and Canon City Self Storage from the operators' own pages; the competitors' unit counts; the Fremont County households, persons per household and renter share; and Prime at the study date.

This model study applies the methodology described on MMCG's SBA self-storage feasibility study page and the SBA SOP 50 10 8.1 underwriting spine. MMCG prepares self-storage acquisition studies for SBA and conventional lenders nationwide, with engagements from $4,900 and delivery in 9 to 16 business days, and a conclusion of not feasible as listed is a regular outcome of the practice.