Five Questions With Extra Space Storage Chairman and CEO Spencer Kirk
|Copyright 2014 by Virgo Publishing.|
|Posted on: 09/16/2009|
1. Extra Space Storage has launched a third-party management program called 3Plus. What fueled this decision?
Extra Space Storage has offered third-party management for many years, but just recently made a push to expand this area of the business. The company’s large footprint gives us the ability to add sites in almost any major market in the United States. Adding to this footprint brings synergies to Extra Space and the owners for whom we manage.
One of the best synergies we share with owners is increased brand awareness, especially on the Internet. The more stores a company operates in a market, the more Internet exposure it can receive―if marketed properly. We have found Internet customers stay longer in our facilities and come from further distances than more costly Yellow Pages customers.
2. How do third-party management services lower expenses for owners?
Extra Space divides operational costs over all of its sites regardless of ownership. By adding more facilities, we lower costs for all owners through increased purchasing power. Most see a tremendous savings in multiple expense line items when being managed by our program. The savings in Yellow Pages, Internet costs and property insurance alone usually makes up for the cost to manage.
3. How many facilities does Extra Space manage, and how do you ensure every owner gets the attention he deserves?
Extra Space currently operates 740 facilities, 224 of which are wholly owned by us and 386 of which are varying types of joint ventures. The remaining 130 facilities are pure third-party management with no ownership by Extra Space. These owners range from large publicly traded financial institutions to individual owners with one facility. We’re set up to manage for all, regardless of the number of properties.
Every facility has a local district manager, marketing manager and revenue manager. Each owner has access to his property accountant. Every district manager is required to have contact with the owner on a monthly basis. We give each owner Web access to the property software in real time. An owner can see what happens at his property from anywhere in the world. In addition to relationships with daily operations personnel, all owners have contacts at the corporate headquarters.
Also, we do not build a first right of refusal into our management contracts. Relationships keep us close to our owners. We like them to think of us as a possible exit strategy. When they’re ready to sell, on their timeline, we’re happy to give them our offer. Because we manage the facility, we can close quickly. We’ve acquired many sites from our partners; we’ve also had partners sell sites to other companies unrelated to Extra Space.
4. With so many owned or joint-venture sites, how can the owner of one property be assured no preference is given?
Extra Space is colorblind and indifferent to ownership when it comes to operation of the facility. Every site is branded with Extra Space signage (which we are willing to pay for when an owner switches to our management system), so customers have no idea who owns the site. Our call center representatives are unaware of the ownership of the site, so they have no way of treating one property differently from another.
We encourage people to test the Internet and call centers all the time just to verify this approach. We’ve partnered with some very large institutions for many years now. They require professional service that would never tolerate any kind of preferential treatment. Our track record speaks for itself.
5. How do you see third-party management as a long-term strategy for Extra Space?
For Extra Space, third-party management is here to stay. It’s a great, low-cost growth strategy that benefits us and the people for whom we manage. In the year since we’ve started to push third-party management as a growth initiative, we’ve added more than 10 percent to our portfolio.
Our message to owners is simple: We know how to manage storage. We have a lot of tools in our toolbox that help drive customers to your property and no other management companies can provide. We can lower expenses and increase the profitability of your storage property beyond what you could do alone. Again, it’s a win-win proposition. With acquisitions and development difficult in today’s environment, this initiative becomes even more important to us today.