Hiring the Right Management Firm for You
|Copyright 2014 by Virgo Publishing.|
|By: Maurice Pogoda and Tom Berlin|
|Posted on: 04/02/2008|
One result of industry maturation is that many owners have turned to property-management firms that specialize in self-storage for the expertise needed to maximize the return on their investments.
Management companies can provide a competitive edge for self-storage operators. They have the expertise and experience necessary to contend with the large, well-financed regional and national companies. In addition, management companies can relieve an owner of the demands of day-to-day operations and provide certain economies of scale that a small operator would not be able to achieve.
What About You?
Typically three different types of self-storage owners seek the expertise of a self-storage management company. Perhaps one of these fits your profile:
1. Individual owners. Often, a self-storage store is owned by an individual who has other business interests and has gotten into the industry for investment purposes. The person generally has many other time demands and may lack the expertise (and interest) to operate a facility effectively.
By turning over operations to a professional management company, these individual owners get the best of all worlds. They still own the property and collect a monthly check without handling day-to-day operations. They have employed an expert management firm that has the tools and experience to help increase occupancy, decrease operating expenses or oversee capital improvements and repairs. This leaves owners time to pursue other ventures, knowing their properties are being professionally managed.
2. Investment/private equity groups. These groups are formed for the sole purpose of buying portfolios of self-storage properties, and they usually have no interest in managing properties themselves.
It is not unusual for these groups to use pension, insurance or securitized funds for the sake of securing a stable rate of return and future appreciation. Often the source of funds won’t allow the groups to self-manage the properties. Having an experienced management company with a proven track record is often a requirement to close the deal.
These investment groups are under intense scrutiny from their funding sources to reach projected goals. A management company must be able to meet demanding reporting requirements, keep high standards for maintenance and appearance of the stores and, in general, have a very high level of sophistication.
3. Financial institutions. With the economic challenges of the past few years, banks, pension funds, insurance companies and numerous other funding sources have found themselves taking back properties after owners have defaulted on loans. Obviously, these "owners" are not in the business of managing real estate. Their goal is to quickly remove the loan from their books and recoup as much of their investment as possible.
Rarely does a store go back to lenders with 90 percent occupancy. In order to achieve a sale at a reasonable price, they must improve operations over the previous owners and increase revenues and occupancy.
Financial institutions use a professional self-storage management company to run the property and increase occupancy, while decreasing expenses and delinquencies in an effort to get the property ready for sale.
Hiring a company to run your property is a big step. Most management companies will require complete control over every aspect of daily operations. Below are some specific questions that should be asked before entrusting your valued asset to such a company:
Taking the Plunge
Once you’ve taken the plunge and hired a management company, there is a great deal you should expect for the monthly fee. It is important, however, to realize that you must give the management company time to implement plans. A complete turnaround won’t occur overnight. Here’s a list of what your management company should provide to you:
No management company can be expected to perform real magic and totally compensate for a poorly designed store in a bad location or saturated market. It should, however, provide you with services that justify its fees, doing everything possible to increase occupancy and decrease delinquencies. A truly professional management company should have the experience to perform the best trick in the book: increasing profitability and turning your store into a more valuable asset. That’s better than a rabbit out of a hat anytime!
Maurice Pogoda is president and Tom Berlin is vice-president of operations for Pogoda Management Co., based in Farmington Hills, Mich., with regional offices in Grand Rapids, Mich., and Dayton, Ohio. Pogoda is Michigan’s largest self-storage operator and one of the 25 largest in the United States, with approximately 3 million square feet of self-storage space under management in Michigan and Ohio in 38 stores. Founded in 1987, the firm provides brokerage, management, investment and consulting services to the self-storage industry. For more information, call 800.326.3199; or visit www.pogodaco.com.