Self-Storage Revival, A Case Study: Florida Facility Makes a Comeback After Years of Neglect
|Copyright 2014 by Virgo Publishing.|
|By: Linnea Appleby|
|Posted on: 05/13/2010|
As new facilities enter the increasingly competitive self-storage industry, it’s critical that older sites find ways to maintain their edge. Location, great curb appeal and excellent front-line staff are what all sites strive for, but sometimes more is needed to contend with modern facilities that offer all the bells and whistles.
While an older self-storage facility may be able to reduce rates and offer discounts in the short term, this tactic is a slippery slope that only serves to undercut your long-term success. It’s easy to get caught up in day-to-day activities and not notice your site is aging right under your nose. A serious look at your investment may show that it’s time for renovations.
One Step at a Time
Rehabilitating an older facility can seem daunting, especially when a site has suffered years of neglect. Don’t be overwhelmed. Instead, break the process into three steps:
1. Evaluate your priorities. Not everything can be done at once. It took time for the facility to reach the condition it’s in, and it will take time to bring it back. First, focus on items that may impact the safety of tenants and staff or reduce future liability. Then determine which tasks can positively impact income, add value or increase the life of your asset.
2. Organize the finances. Since you’ll need additional resources to fund each project, collect bids and create a timeline to accomplish each item.
3. Manage the process. You’ll encounter some speed bumps and road blocks along the way. Count on the fact that it will take longer and cost more money than you had hoped. It’s a journey.
A Rehab Case Study
Here’s a case study of a self-storage facility in Hypoluxo, Fla., currently undergoing major renovations. Built in 1984, Hypoluxo Storage was constructed to the high standards of that time. It filled up fast and enjoyed occupancy in the 90-percent range, with good income for many years.
In the mid-’90s, the owner began experiencing health trouble and hired a manager. A combination of poor management, theft, a couple of bad hurricane seasons with insufficient insurance, and a downturn in the economy turned into the perfect storm. By 2009 the facility was badly neglected. Occupancy had dropped into the low 30-percent range, income had plummeted, and receivables were more than $50,000. It was then the owner realized drastic action was needed to make this a business viable again. He hired a Florida-based self-storage management company to take over the operation.
Upon completion of a site evaluation, it was determined that security should be a priority. A $5,000 access gate and $13,000 in security cameras were installed. A $3,500 railing was erected around the deck of the upstairs apartment.
The next problem to be a addressed was the open and failing septic system. A complete overhaul of the restrooms was accomplished at about $3,200.
The office also needed major restoration, including the relocation of the front door and the replacement of sign faces destroyed in a 2004 hurricane. Total cost for the office remodel was roughly $33,000.
In addition to the physical renovation, the business operation was refurbished. When the management company took over, few of the tenants had leases and tenant ledgers were made manually in pencil. A computer system and property-management software was installed, including credit card capabilities and a tenant-insurance option. Proper forms and documents, including a new lease, were instituted.
While the staff became involved in the community and participated in chamber of commerce events, a marketing plan was implemented. Materials such as brochures, coupons and fliers were created, and a tenant-referral program was initiated. A website was built, offering tenants online payment and reservation capabilities. Although public sales for delinquent units are not yet back on track, all past-due tenants are on payment plans.
With the monetary commitment from the owner and a lot of hard work from the management company and its staff, Hypoluxo Storage is making a comeback. Occupancy is now at 40 percent, on-time rent payments are increasing every month, and past-due accounts are being managed.
The challenges have been many. This project has required the cooperation and assistance from everyone―staff, tenants, neighbors and government officials. The phrase “It takes a village” rings true at this location.
While the Hypoluxo facility is an extreme case, it took years for the facility to fall into such poor condition. It was an unfortunate combination of events and situations that lead to a downward spiral. It didn’t happen overnight, and the revival is a process that will continue to take time. This facility has a long way to go, but is well on its way to recovery and will once again be a strong business in the Florida community.
Linnea Appleby is president of Sarasota, Fla.-based PDQ Management Solutions Inc., which specializes in the management of self-storage properties and offers complimentary services such as operational consulting, new-facility startup, property audits and the “Income Finder Service.” Appleby is a regular contributor to industry trade publications and a frequent speaker at tradeshows and events. For more information, call 941.377.3451; e-mail firstname.lastname@example.org; visit www.pdqmanagementsolutions.com.