Buying Self Storage on a Master Lease Option style of transaction

During a coaching call with a mentee, we discussed a property that has a super low occupancy - approximately 15%.  The owner owned the property free and clear and was an experienced investor/developer (hence he wasn't going to give the farm away).  He said he's base the property's sale price based on a ProForma rather than existing numbers.  Initially, my mentee wrote the property off as just slightly better than a scam.  

I had one suggestion if she was going to consider a property such as this - a Master Lease Option.  An MLO is basically an overarching lease on the business and property and you run the entire thing and the owner collects payments from you.  The key is that you work out a monthly lease payment that is equal to or less than existing rents MINUS the expenses.  It basically offers the seller the same monthly payments that they are currently getting and the upside goes to you, the lessee.  The benefit to the owner is that he can charge you for the Option to buy (typically $2-10K) the property in the future at a higher than market value.  

In this the case the market value of the property with a 15% occupancy doesn't even cover costs to construct.  I get why he wouldn't want to sell at that valuation.  However, you can't say the property could be 100% rented and therefore the valuation is based on 100% occupancy, either.  So maybe you can come to some middle ground on the Option Value that makes sense and that could actually be financed through a bank once you get the property stabilized and cashflowing nicely.  

The key is that a bank will want between 10-30% down, and income has to cover the debt service at a ratio of 1.2:1 or better.  So you'll have to do some soul searching on what an achievable occupancy rate is and price the property accordingly.  The idea is not to lease the property through the end of the lease (typically 3-5 years - I suggest 5 years or more), it is to increase occupancy such that a bank will finance the property for you.  Well, unless the lease is cheaper than the bank financing.  In that case you'll have to consider both options.  

Your risks as a buyer: The property IS stabilized at 15% and you're doing all the work for no profit.  Or you go backwards and lose tenants and you have to pay in to the owner each month.  Frankly, I'd say at 15% occ, you're pretty safe!  You also risk putting an option price on the property that is too expensive and you can't actually achieve it.  Let's say you can't get the property over 50% occupied and therefore the option price can't be financed by a bank.  Well, the good news is that you only put down a few thousand dollars for the option and hopefully now that you're at 50% occ, you're making cashflow on the property each month over the lease payment.  

I would say with a 15% occupancy rate, you probably can't go backwards.  However, you would want to check nearby facilities for their pricing and occupancy (there were a number of facilities nearby which probably hurts the upside of this property).  But you can set super low prices and put out flags and offer concessions to get people to rent from you to get occupancy up.  

The risk for the seller: The lessee deferrs a bunch of maintenance and leaves the facility in worse condition than they took it over.  Again, hopefully they got a decent price on the "Option" such that they could cover most to all of the issues that could arise.  The other risk is that they might sell it for under market rates.  But that would also require the seller to do a better job of managing the facility (which it sounds like he's not interested in).  

This one feels like a win-win on a MLO if they can come to terms on an option price and an option payment as well as a lease payment.