From Ground-Up Development to Strategic Conversions
This analysis examines Nomad’s journey through various real estate ventures, highlighting how their diverse experience has positioned them as experts in the lucrative self-storage conversion niche.
(2006)
Ground-Up Beginnings:
Self-Funded Kachina Self-Storage
Over an 11-year period, this single facility produced remarkable returns:
- 18.5% cash-on-cash return annually
- $1.2 million cash-out refinance in 2019
- $120,000 annual cash flow, growing at 5% yearly
In 2023, the facility’s size was doubled, further enhancing its revenue potential. This initial project not only established Nomad’s expertise in self-storage but provided capital for future investments.
(2016)
Self-Funded Conversion:
City Storage North
Despite taking several years to reach full occupancy, the financial outcomes were exceptional:
- $1 million refinance in 2019
- $97,241 annual cash flow by 2024
- 7.48 equity multiple
- 86% internal rate of return (IRR)
This project demonstrated a crucial principle: converting underutilized commercial space into self-storage facilities can deliver superior returns with lower development costs compared to new construction.
(2017)
First Investor-Backed Project:
Apartment Syndication
While establishing their self-storage expertise through self-funded projects, the Hemingways reached an important milestone in 2017 with their first investor-backed project. They acquired Hampstead Apartments for $1.4 million, marking their first venture using outside investor capital. After strategic renovations and rebranding, they sold the property two years later, delivering:
- 1.94x equity multiple
- 30.35% annualized IRR
This successful apartment project not only showcased their ability to identify value-add opportunities across different real estate sectors, but also demonstrated their capability to deliver strong returns to outside investors, laying the groundwork for future syndicated deals.
Another Self-Funded Success:
Value-Add Self-Storage
- Increased rental revenue from premium climate-controlled units
- Significant reduction in operating expenses
- Enhanced property value with minimal capital investment
This self-funded project exemplifies the Hemingways’ approach to finding properties with untapped potential that can be unlocked through strategic improvements.
Self-Funded Boutique Hotel Transformation
This remarkable self-funded turnaround illustrates how the Hemingways’ value-add expertise can be applied across different property types to achieve exceptional returns, even without outside investor capital.
First Fully Syndicated Deals:
Large-Scale Self-Storage Conversions
These large-scale conversion projects represent Nomad Capital’s evolution into full syndication:
- Reidsville’s projected IRR: 18-20%
- Danville’s projected IRR: 17-19%
- Projected equity multiples: 2x for Reidsville and 2.1-2.3x for Danville
These substantial syndicated projects validate the Hemingways’ thesis that repurposing big-box retail spaces into self-storage facilities represents a significant opportunity for passive investors while demonstrating their ability to scale from small self-funded projects to large syndicated investments with an expanded leadership team.
Why Nomad’s Self-Storage Conversion Strategy Works
Lower Development Costs and Accelerated Timeline
In contrast, Nomad’s conversion strategy costs, on average, just $65 per square foot all-in – that includes the cost of the building, the land, and all construction. Even more impressive, these projects take an average of only 12 months from acquisition to opening doors, due to needing less site work and being able to utilize the existing shell of a building.
This lower cost basis (nearly 50% less than ground-up development) and dramatically accelerated timeline puts Nomad at a significant competitive advantage. Existing structures already provide the basic infrastructure, eliminating many costly construction elements while allowing faster time-to-market and quicker cash flow generation.
Operational Efficiency
Compared to other real estate asset classes, self-storage facilities require minimal ongoing maintenance and management oversight. This operational simplicity translates to:
- Lower property management costs
- Reduced capital expenditure requirements
- Fewer tenant-related complications
- More predictable cash flow
Proven Value-Add Strategies
Nomad’s portfolio demonstrates several effective value-add approaches:
- Implementing climate-controlled units (commanding 15-40% higher rental rates)
- Energy efficiency upgrades to reduce operating expenses
- Optimizing unit mix to match local market demand
- Strategic facility expansions to maximize land use
Investment Metrics:
Nomad’s Performance by the Numbers
Cash-on-Cash Returns
Nomad’s projects have consistently delivered strong cash flow relative to initial investment:
- Kachina Self-Storage: 18.5% cash-on-cash return
- City Storage North: Growing to $97,241 annual cash flow from $170,000 initial investment
- Boutique Hotel: $230,000 annual cash flow from $200,000 renovation investment
Equity Multiples
Total return on investment across various projects:
- City Storage North: 7.48x equity multiple
- Hampstead Apartments: 1.94x equity multiple in just two years
- Projected multiples for recent projects: 2.0-2.3x
Internal Rate of Return (IRR)
Time-weighted performance metrics:
- City Storage North: 86% IRR
- Hampstead Apartments: 30.35% IRR
- Boutique Hotel: Projected 58% IRR
- Recent large-scale conversions: Projected 17-20% IRR
The Evolution from Self-Funded to Syndicated Investments
1
Proven Self-Funded Success: Erik’s early projects using his own capital established a solid foundation of expertise and successful execution.
2
First Investor Partnership: The Hampstead Apartments project in 2017 marked their first use of outside investor capital, delivering exceptional returns to those initial partners.
3
Full Syndication Model: The Kmart conversion projects represent the culmination of this progression – fully syndicated deals with an expanded leadership team including Neil Henderson and Clint Harris as General Partners, allowing passive investors to benefit from their collective expertise.
Conclusion: The Hemingway Vision for Self-Storage Investment
- Identifying undervalued properties with conversion potential
- Implementing cost-effective improvements that significantly boost NOI
- Scaling from small individual projects to large syndicated investments
- Maintaining strong performance across different market cycles
For passive investors seeking financial independence through real estate, Nomad’s specialized experience in self-storage conversions offers access to a recession-resistant asset class with compelling economics and proven returns.
Disclaimer: This article is for informational purposes only and should not be considered investment advice. Past performance is not necessarily indicative of future results. Investment in real estate syndications involves risk, including possible loss of principal. Always conduct your own due diligence and consult with financial advisors before making investment decisions.
