Occupancy levels in self-storage are managed dynamically through pricing. If the facility is not reaching 93% occupancy, we adjust pricing and concessions to drive lease-up. The lease-up strategy is based on velocity, with an expectation to rent about 5% of the units per month. Concessions, such as introductory rates or free months, attract customers. Once at 80-85% stabilized occupancy, pricing strategy shifts from lease-up to revenue maximization. During peak summer seasons, occupancy ideally reaches 95%, while some decline is expected in winter. There is no absolute "lowest acceptable" occupancy rate because we can always adjust pricing to drive demand. Self storage properties typically achieve break-even occupancy at around 60-75%

Yes, all competing properties, including those in the pipeline, were analyzed. We use data from CubeSmart, Extra Space, Public Storage, and internal sources, including our acquisitions and asset management teams. We also conduct direct market research, including secret shopping, to confirm market conditions. The feasibility study attached to the legal documents confirms that this market can support multiple high-quality self-storage facilities without oversupply concerns.

Yes, refinancing is an option if financial conditions warrant it. Several value-creation opportunities exist, including securing entitlements, completing construction, and achieving stabilized occupancy. If market conditions allow, we may refinance to return investor capital earlier. However, the business plan is to hold for five years and potentially sell to a REIT or private equity firm looking for stabilized cash flow. If refinancing becomes a viable option, investors would be consulted on the best course of action.

Yes, while the business plan targets a five-year hold, we have the flexibility to extend if it benefits investors. If returns justify continuing operations instead of a sale, we could opt for a long-term hold strategy. This could involve refinancing to return capital while maintaining ownership or transitioning the asset into a long-term cash-flowing investment.

The investment structure includes a 10% preferred return, meaning investors receive the first 10% of profits annually before any profit-sharing with the general partner. Returns are structured as follows:

• Up to 10% IRR: 100% to investors.
• 10% - 18% IRR: 75% to investors, 25% to the general partner.
• Above 18% IRR: 50% to investors, 50% to the general partner. This tiered structure aligns incentives, ensuring the general partner benefits primarily when investors receive strong returns.

Yes, the entire facility, including the subfloors, will be climate-controlled. The construction budget includes a 7% contingency to cover unexpected costs. Additional buffers exist at multiple levels:

• Initial high-level estimates ensure conservative underwriting.
• Contractor bids and final pricing provide further refinement.
• An additional $200,000 buffer was identified through budget refinements.
• Worst-case scenarios allow for adjusting construction phasing or alternative capital sources. By maintaining these safeguards, we ensure cost overruns do not negatively impact the investment.

Hearthfire chose Whitehall, within Lehigh Valley, PA, due to a strong infrastructure, strategic location, and a steadily growing population, which combined make it an ideal environment for sustained investment and economic development.

The Lehigh Valley offers a compelling investment landscape due to its strategic location and economic strength.

Key highlights include:

• Proximity to Major Markets: Close to both New York and Philadelphia, offering access to major markets without the high costs.
• Attractive for Logistics and Business Growth: Companies like Amazon and FedEx are establishing operations here, drawn by the region’s lower costs and logistical advantages.
• Population Growth: Expected to grow by 100,000 residents by 2050, driving continued demand for housing, services, and storage.
• Strong Economic Performance:
      - $55.7 billion GDP in 2023.
      - $8.1 billion manufacturing sector, showcasing robust growth potential.
• Job Creation & Major Employers:
     - Job growth is accelerating in logistics, manufacturing, healthcare, and e-commerce.
     - Major employers such as Air Products and Mack Trucks are expanding their operations in the area.
     - Unemployment is at a 20-year low, creating a stable and attractive environment for investment.

Here are some recent headlines highlighting the region’s growth:

• Lehigh Valley Hottest Small Market of 2024 (CREDaily)
• Germany-based manufacturer moving hydraulic valve production from China to facility in Lehigh Valley
• Lehigh Valley GDP grows to record $55.7 billion
• an increase from previous, Lehigh Valley's Economy Hits Record $50 Billion GDP
• These are the Bethlehem development projects to watch for in 2025
• In the pink: Experts see continued growth for Lehigh Valley economy
• Lehigh Valley: Phenomenal Manufacturing Success 

Our primary customer base consists of:

• Residential Movers & Homeowners: Individuals relocating, downsizing, or in need of temporary storage during life transitions.
• Apartment Renters: With increasing multifamily developments in the area, tenants often require additional storage solutions.
• Small Businesses & Contractors: Local entrepreneurs, tradespeople, and e-commerce businesses need storage for inventory and equipment.

Note that in our immediate service area (1- and 3-mile radius), there is a 52% renter population. (Hearthfire targets a minimum of 30%) This - plus the full occupancies at competitors in the 3-, 5-, and 10-mile radii - underscore the demand for storage.

Our customer mix reflects the broader demographic and economic trends in the Whitehall market, ensuring a steady demand for storage solutions.

Yes.

Both metrics assess investment performance but serve different purposes:

• IRR (Internal Rate of Return): This represents the annualized return on investment over the project's entire life cycle, factoring in all cash flows (investment, operating income, and eventual sale). It accounts for the time value of money and is often the key metric for long-term investors.
• Development Yield (or Yield on Cost): This measures the project's initial return upon stabilization, calculated as Net Operating Income (NOI) / Total Development Cost. It provides a snapshot of profitability based on construction and lease-up costs before considering appreciation or exit valuation.

In this project, IRR helps assess the overall attractiveness of the investment over time, while Development Yield provides insight into the project's operational efficiency at stabilization.

We have raised over $1MM funded and over $3mm in committed and interested investors.

Yes, from our Debt Fund. That will be paid off with the equity from the raise.

The GP has invested in the project by carrying all the construction costs to date, since 2023, and by personally guaranteeing the loan. Across our portfolio we average 7-10% of total equity. 

• Self storage construction typically takes between 12-16 months to complete, which is far less time than the majority of all other real estate construction. In addition, self storage builds have many components that are modular and standardized. For example, the storage units themselves are ordered and delivered to be assembled using simple and standard methods.
• The Whitehall construction will be completed June 2026.
• This is not based on past projects, this is based on the actual project schedule, since the GC is breaking ground in March.

Yes, all lenders require enough funds to cover the interest during the construction period. 

When the project is generating sufficient cash flow to meet DSCR and have distributable cash.

No - we use 3rd party managers. See this press release

Yes

• The cap rate of 5.5% is based on a conservative rate typical for the market and type of asset we are building. Even with high interest rates, most properties of this caliber are trading closer to 5% cap rates.
• Our model has a sensitivity analysis that calculates returns at different terminal cap rates, see that here:

The construction will be completed June 2026.

Yes. The construction contingency is 7%.

We have multiple term sheets, here are two with the highlights.

Stearns Bank:

1. Full due diligence review of transaction
2. Receipt and review of acceptable appraisal, environmental report, and ALTA Survey
3. Stearns Bank Committee, CDC, and SBA Approval
4. Stearns Bank to pay the required CDC Loan Fee of $41,750

PSG:

1. Developer Fee funding: 50% pro rata to project progress as part of construction draws, 25% on TCO, 25% on CO + 10% economic occupancy milestone
2. Satisfactory GC (fully Bonded) and cost verification/budget
3. Full Recourse from Key Principals/Sponsors Subject to receipt and review of financial statements
4. Borrower/Guarantors to show 10% post-closing liquidity and 100% net worth with maintenance requirement.

While these factors can influence the broader construction industry, our approach to planning, budgeting, and contractor selection ensures we are well-positioned to mitigate risks and maintain project execution as planned.

1. Pre-Priced & Secured Materials: A significant portion of the materials required for our project has already been priced and, in many cases, acquired by our construction team. This minimizes exposure to potential cost increases resulting from new tariffs or supply chain disruptions.
2. Stable Contractor & Workforce Strategy: We do not engage with contractors who rely on labor that could be significantly affected by immigration policy changes. Additionally, our general contractors have a stable workforce and established subcontractor relationships, ensuring that labor availability does not pose a risk to the project timeline.
3. Inflation & Tariff Allowance: For Whitehall, we have a separate allowance set aside specifically to account for inflation, tariffs, and other unforeseen cost increases. While it is difficult to predict the exact total impact of such policies, this project came in under budget at Guaranteed Maximum Price (GMP). As a result, we were able to set aside an additional allowance to further buffer against these potential expenses.
4. Budget Contingency for Unknowns: Beyond the specific inflation and tariff allowance, our project budgets also include a contingency to account for any unforeseen circumstances, including potential cost variances tied to macroeconomic or policy changes. This ensures we have the financial flexibility to adapt while protecting projected returns.
5. Diversified Supplier & Contractor Network: We work with multiple suppliers and contractors to reduce dependency on any single source. This allows us to pivot if needed and avoid unnecessary exposure to tariff-related cost increases.
6. Historical Adaptability & Project Resilience: Hearthfire has successfully executed development projects through varying market conditions, including inflationary periods and supply chain disruptions. Our experience in navigating evolving economic and policy landscapes reinforces our confidence in our ability to deliver this project as planned.
7. Project Timeline & Flexibility: We are actively monitoring any policy changes that could impact construction and have structured our approach to allow for adjustments if necessary. This flexibility ensures that any emerging risks can be managed efficiently without delaying the project.

Overall, while macroeconomic and policy shifts are always a consideration in real estate development, our disciplined approach—combined with strategic material procurement, stable labor partnerships, dedicated inflation allowances, and prudent contingency planning—ensures that we are well-positioned to execute this project successfully.

Here's an overview of some key demographics and their motivations:

1. Age Groups:

• Generation X (Aged 40–55): Approximately 23% of Gen X individuals rent self-storage units, making them the most prevalent users.  Home
• Millennials (Aged 24–39): This group accounts for about 25% of storage users, up from 20% in previous years. Notably, nearly a quarter of non-renting millennials plan to use self-storage in the future, often to facilitate moving.  Market Share

2. Primary Motivations:

• Lack of Space at Home: Around 40% of users rent storage units due to insufficient space in their residences, a slight increase from previous years. Home

• Moving or Relocating: Approximately 34% utilize storage during transitions such as moving, with millennials particularly inclined to rent storage to assist with relocations. Market Share

• Decluttering: The trend of decluttering has led 42% of respondents to rent storage units to manage household items, especially with the rise of remote work making home spaces more multifunctional.

  Market Share

3. Stored Items:

• Furniture: About 34% of users store furniture, including items like dining tables, chairs, and small cabinets.
• Clothing: Approximately 22% store clothing, with renters more likely than homeowners to use storage for wardrobe items. Home

4. Housing Status:

• Renters: Individuals in rental housing are significant users of self-storage, often due to smaller living spaces and higher mobility. Areas with high renter-occupied housing percentages typically exhibit increased demand for storage solutions. Radius+

5. Business Use:

• Small Businesses and Entrepreneurs: A growing segment of self-storage clientele includes small business owners who utilize storage units for inventory, equipment, and documents, finding it a cost-effective alternative to traditional warehousing. Home

Despite economic fluctuations, self-storage remains a stable asset class due to its resilience during market shifts and changing housing dynamics. The demand for storage solutions often increases during economic transitions, making it a reliable investment choice.

• Variable Rates During Construction: We begin with variable interest rates during the construction phase, which lets us benefit from current market conditions as they evolve.
• Interest Reserve: To ensure that rate fluctuations don’t disrupt our project’s cash flow, we allocate an interest reserve specifically to cover the cost of interest during the construction period. This reserve acts as a buffer, guaranteeing that all interest obligations are met even if rates shift unexpectedly.
• Rate Fixing Within 36 Months: Recognizing the need for long-term predictability, we commit to fixing the interest rate within 36 months. This strategy secures a stable rate for the remainder of the project, mitigating the risk associated with ongoing market volatility.

Our self-storage investments limit income loss through customer damage and lien protections. Additionally, leveraging multiple rental income streams from customers enhances the resilience and profitability of our projects.

This investment is considered illiquid, designed for long-term returns. Hearthfire's credibility is reflected in our 90% reinvestment rate, strong family and friends' support, and our commitment to safeguarding investors' funds with a personalized approach.

Despite concerns about oversaturation, the self-storage sector continues to experience high demand driven by population growth, urbanization, and changing lifestyles. Industry studies indicate sustained demand outpacing supply, making self-storage a promising investment opportunity.

Hearthfire has acquired the property with land permitting, development approvals, and plans in place. We have submitted permit plans to the city for review and are scheduled to commence construction shortly after receiving permits, ensuring project continuity and compliance. We expect to have permits in hand by Q1 2025. 

Absolutely. Our team brings over 100 years of combined experience in commercial real estate, with a track record of leading multi-billion-dollar transactions across diverse sectors. This institutional-level expertise ensures unparalleled value and strategic insight to drive our company's success. Additionally, our leadership has firsthand experience owning and managing properties within these markets, understanding their unique needs and dynamics.

Our strategy is built on a foundation of market ownership, forward-thinking location choices, and a keen understanding of economic trends. We dominate our market, strategically position ourselves near key infrastructures like airports to block out competition and invest in areas with promising future development plans. Detroit's resurgence further validates our approach, leveraging existing undersupply for maximum returns. Our cost-effective building approach in areas with lower land bases ensures substantial profitability and flexibility. Despite higher interest rates, the area's income levels support alternative revenue streams like storage rentals, backed by psychological trends in consumer behavior. Ultimately, we build where demand is high and needed most.

Our investors are not just partners; we are a dedicated family committed to ethical practices and mutual success. Our reinvestment rate is aligned with sustainable growth objectives, ensuring ongoing prosperity for all stakeholders.