Underwriting rate recapture when street rates are still drifting down

55,000 rentable square feet, 480 units, asking $4.9M. Trailing twelve NOI is $348k, so 7.1% on the ask, and the broker is running his pro forma to a 8.4% year-three yield entirely on rate growth. Physical occupancy 91%, economic 74%.

The problem is the composition. 44% of the leases are under 12 months old, which the broker presents as upside because they're all below street. But the street rates themselves have come down about 6% on the 10x10s over the past year in this submarket, and there's a 700-unit facility that opened 2.4 miles out and is still in lease-up giving away two free months. So the gap he's calling recapture is partly just the market repricing itself downward, and the ECRI letters I'd be sending would be pushing tenants toward a number that keeps moving.

Second issue. Expenses are shown at 32% of EGI. I have zero self-storage operating history, but coming from small multifamily that ratio makes me itchy. Property taxes will reassess on a $4.9M sale in this state and the trailing figure reflects an assessment from years ago. Insurance quotes I'm hearing on similar facilities are running well above what's in the T12. I get to about 38% before management fee if I fix just those two lines, which takes NOI down near $310k and the cap to 6.3%.

So: how are people underwriting ECRI recapture in a submarket with a lease-up competitor, and does anyone actually model a churn cost against the increase? My working assumption is that every 10% ECRI bumps move-out rate by some amount and I've got no basis for the number.