February 1, 1998

15 Min Read
Inside Self-Storage 2/98

Sydney James Chiswell, knownbetter as Jim, is president of Chiswell & Associates Ltd., aWilliamsville, N.Y.-based consulting firm that specializes inbusiness development, sales and marketing, employee training,strategic planning and association management. A graduate ofState University of New York at Buffalo with a degree inpolitical science, Mr. Chiswell became active in the NationalAssociation of Home Builders in 1982, directing the headquarters'staff of 25 people and a national field staff of eightspecialists. In addition, he was responsible for nationalmembership operations and management of special-interest councilsin the fields of sales and marketing, remodeling, commercialconstruction and multifamily development and management.

In 1984, Mr. Chiswell entered the self-storage industry byway of the Sovran Group Inc., also based in Williamsville, N.Y.As a Sovran vice president, he was responsible formanagement of the company's real-estate portfolio, consisting of36 self-storage facilities with 1.9 million square feet ofrentable space. He also managed a team of individual propertymanagers and regional district managers, encompassing anine-state area. Six years after joining Sovran, he left thecompany and established Chiswell & Associates.

A past regional president and board member of the SelfStorage Association, Mr. Chiswell makes his home inWilliamsville, N.Y., with his wife, Jackie, with whom he hasraised two daughters, Alyssa and Christie. He has been a frequentcontributor to Inside Self-Storage and has conducted numerousseminars at the Inside Self-Storage expos and trade fairs.Through the years, he has advised and inspired many self-storagedevelopers, operators and managers--through his consultingservices, speaking engagements and published articles--garneringa reputation as one of the most respected and revered members ofthe self-storage community.

We are honored to present an interview with JimChiswell...

Can you give us a brief synopsis of how you were firstintroduced to the industry and what the status of self-storagewas at that time?

My first introduction to the industry was at the NationalAssociation of Home Builders in Washington, D.C. At that time, Iwas a staff vice president of NAHB and worked with the CommercialBuilders Council--a special-interest council within the nationalorganization. Some of the men on the council, like Jim Knuppe ofCalifornia, were telling others on the committee that they werebuilding facilities and renting empty units to people to storetheir belongings. They were very successful with these projects.I also remember some of the people thinking that they were nuts.

My in-depth involvement came when I joined the Sovran group in1984. I joined the firm doing apartment acquisition duediligence. Bob Attea, now chairman of the board of the SovranSelf Storage REIT (real estate investment trust), had an interestlooking for new investments for the company to key in on. He wasreally the one who got me focused on self-storage. At that sametime, Buzz Victor (a former Buffaloian) was conducting hisseminar program--similar to what he is doing today. I went to LasVegas for one of the seminars, which was a great way to immerseyourself in the industry. The sessions helped to fill in some ofmy knowledge gaps and allowed me to get to know more about theindustry from experts. I respect all that Buzz has accomplishedin the industry and the influence he has had in shaping the earlydirection of self-storage.

Anyway, the industry in the 1980s was starting to take hold,more in the South and the West than in the Northeast. For thetime that I was at Sovran, which was until about 1990, theindustry experienced a considerable amount of growth, and peoplecould virtually just throw together a building and tenants wouldfill it up. So the industry was basically in its infancy.

How would you say that things have changed over theyears?

If you look at the last 10 or 15 years, the amount of moneythat has moved into this niche real-estate market has changedthings a great deal. Investors now understand that self-storageis not a fad or a method to just "land bank" property.It started out with private limited partnerships and then publicpartnerships, and finally, a big role is played by REITs, such asStorage USA, Storage Trust and Sovran. I anticipate a couple ofnew REIT entries to come to market in 1998. Certainly the amountof money and attention self-storage has received from Wall Streetis changing the industry. We are going through a consolidationphase as a maturing business. I expect that to continue for sometime. The major players still control a minority share of theindustry, but they clearly control many individual market areas.

As a whole, the industry has definitely matured a great deal.Probably the majority of owners have computerized theiroperations, and there's a great deal more attention being paid tofacility design and the flow of traffic and people. We are alsospending more money to provide increased levels of security forthe property and our customers. And who would have thought thatpeople would be carpeting the interior hallways of their projectsand entire newly constructed projects are being built with 100percent climate controlled units.

We also have a lot more commercial people who have recognizedwhat self-storage can mean. One of the things I've said for yearsis that self-storage has never been given the credit it deservesfor helping entrepreneurship in America. There are hundreds ofthousands of small businesses in America, where people areworking out of their homes. Their businesses exist because theyhave a place for the UPS and Roadway trucks to deliver theirinventory--a place for them to warehouse their products andsamples. Self-storage offers them a place that is close to homeand convenient, but it's still a short-term arrangement.Therefore, if their business turns around or they can grow it,they can move out of the storage unit without any problem. We'venever gotten the credit for the positive impact of makingavailable short-term, affordable storage space to small-businessowners, who otherwise would find themselves with problems withtheir neighbors because of the truck deliveries and stuck havingto rent a much larger space on long-term lease.

Also, our residential customers have learned to useself-storage to help make lifestyle decisions. We are not usedonly when someone moves anymore. I see that also helping tocontinue growing the industry. It is creating an entire strata ofoccupancy that is never going to leave. If you look at theaverage residential customer, he rents for about six to eightmonths. On the commercial side, the average stay at manyfacilities is running 20 to 24 months. You still have a lot ofins and outs, but I think people are beginning to recognize thatself-storage allows them to take more control of theirlives--putting lawnmowers in storage for the winter and takingout the skidoos for the winter, for example, or women who live insmall Manhattan efficiency apartments storing theirchange-of-season wardrobes in a self-storage unit.

I attribute some of the growing awareness about self-storageto college and military families. After graduation or moving intocivilian life, it is a natural thing to continue to useself-storage when it has served you well for several years. Justthe shear number of projects with all those doors serving as"silent signs" have also helped increase our visibilityto the American public. Although I have not seen any scientificdata, my guess is that the majority of Americans has still neverused self-storage. So there is still a level of potential demandthat has not yet been tapped.

We seem to be sailing through the '90s. Do you thinkthat the industry has learned from the glut of the late '80s andearly '90s?

Some people have, but many have not. The people who havelearned have been in the business for a number of years. Thepeople who haven't been in the business for long don't understandthat this business goes through cycles and that you can overbuildan area. From what I can see, we're going to continue drawing newpeople to the industry. I've seen an awful lot of construction inthe last couple of years. So, I do think we are going to seeoverbuilding in some markets.

The difference between this time and last time is that thereare a lot more people standing on the sidelines--vultures, callthem what you want--who are prepared to walk in if things gowrong. If by chance a bank has to take back self-storagefacilities because of a group's inability to make mortgagepayments, they won't have them for very long. Between the REITsand strong regional companies out there, they will step up to theplate quickly to buy any project at below-retail market prices.

Another factor to consider is the older facilities thathaven't been maintained, that are in "B" and"C" locations; these facilities are going to pay aprice.

Do you think the small-time operators (who run maybeone or two facilities at the most) have a fighting chance againstthe major players in the industry?

There is no question that the individual entrepreneur willalways have an opportunity to make a success in this business.You can look at all the chain restaurants-the Applebees, theOlive Gardens, the Chilis--you might think that they monopolizethe restaurant industry, but there's always room for the goodquality restaurant run locally by a business person who isattentive to his customer and the community. I've said it before,and I always get in trouble for saying this: A committed localowner can always out-manage a national company. Because they'rethere, they bring more personality into the business and pay moreattention to detail, the facility is generally kept in bettercondition. The other thing, too, that gives them a fightingchance, is that they know their local market better.Unfortunately, I've also seen owners who worked hard to get theproject and leased-up to 80 percent to 85 percent occupancy thenhave started to neglect things because they are getting a greatreturn and just assume everything will continue to sail along.Before they know it, problems have developed and occupancy isdropping. Many times it didn't have to happen if they hadcontinued to stay involved in the facility.

How do small-time operators stay afloat?

They stay afloat by paying attention to detail. They continueto run a successful business by looking at it and considering howit can be improved, how it can be better maintained or howmanagement can be improved. How can I stretch my managers so thatthey are better at their jobs and treat my customers better? Am Istaying on top of what's going on in the marketplace in terms ofpossible new competition, new subdivisions or new developmentwhere I could generate new rentals? It's my attention to detailthat assures me that I'm the cheapest facility in the market. Italk to people that haven't moved their rents in three years andI look at them and ask, "Why?" It just doesn't makesense.

Another thing that will help them stay afloat against thebigger operators is to keep the project looking sharp. Forexample, the curb appeal of the project can make a realdifference. Keep putting out the seasonal annual flowers. Makesure the signs and paint outside and inside the office are alwaysdetailed. In many cases, I see the local operator creating abetter end-product than what the national companies are doing byin large.

Do you think the industry will continue to grow at thesame rate it has in the last couple of years?

I think there are markets that will continue to experienceeven stronger growth than they've been. I look at the Northeastand see an area that continues to be woefully underserved byself-storage. A part of that is because of zoning. I was down inTexas and met an owner who was able to put up a 4-by-8-footbillboard as a sign for his facility. I couldn't put up a4-by-8-foot billboard for a facility in suburban Buffalo, where Ilive, if the land was owned by the mayor and the city council wasall involved in the project. So, in some cases, the zoning is alot more restrictive, and it takes a lot more creativity tosuccessfully convert a building to self-storage than to build ona five-acre piece of land at the intersection of two great roadsoffering tremendous visibility.

What are the dangers ahead?

Some of the dangers are to believe our own pressclippings...that this industry is on a tear and that it willcontinue to grow uniformly across the markets. That is not thecase. Another area of danger is deferred maintenance. You do needto spend money to make money. I also see danger signs whereowners are not involving their managers and other employees inthe entire business. They're not involved in preparing the annualbudgets or in designing the Yellow Pages. Those are all classicsymptoms to me that you've got problems ahead.

What are the repercussions?

You run the risk of increased theft and the loss of tenants.Another problem is crime. Crime continues to be a problem forthis industry, and requires that we take the time to know what'shappening at our facilities. A lot of owners and managers thinkthat the whole issue of "care, custody and control"means that we can't ask people, "What's in thatcanvas-covered truck?" But that's just not true. I haveevery right to ask you what you're storing in that unit in mybuilding. Our occupancy agreement precludes things from beingstored. But if you don't ask, how will you know? Unlike ourPresident Bill Clinton's idea of "don't ask, don'ttell," it doesn't work for self-storage. I've talked tomanagers that think it isn't right to watch while somebody ismoving stuff into a unit, but if they're stacking the unit withpropane gas tanks, don't you think the manager/operator has theright to say, "Wait a second. You can't do that. You'reviolating your occupancy agreement."

Managers should be visible on the site. The more visible amanager is outside the office, the less likely something criminalis going to happen. There are a few people who have criminalintent that will try to take advantage of this industry. I thinkit's up to all of us in this industry to work very diligently tomaintain the excellent reputation that we enjoy all across thecountry, so we don't run into problems in the future.

How can we combat the crime problem?

Again, it's diligence in how you screen the tenants. Perhapssomething as simple as how the facility is lit at night. Whatdetails are you considering? Do you have cameras up or are theyjust fakes? Well, we have people relying on the fact that theythink they have video surveillance--and that's why they selectedthe facility to begin with. Where we lose attention to detail iswhen this industry gets into trouble.

One of the traps that we've fallen into is that we thinkcomputers run a self-storage facility. They don't; people runself-storage facilities. Computers are just a tool to help us dothe job easier. They don't run a project; they just free themanager up so that they can run the facility more easily. On thatnote, I don't care how small your facility is, you should have acomputer, because it is a great tool. But, it is just a tool.

What are the highlights of the future?

I think the future holds a growing level of professionalismfor this industry. I think education is the key to that, and Ithink it's going to be one of the highlights over the next fiveto 10 years. I think you'll be able to walk into most facilities10 years from now, and that manager is really going to do aquality job, making you understand the features of the facility.They're going to do a quality job on the phone in getting you tocome the facility. Because, to me, self-storage isn't sold overthe phone, it's sold when that person comes in the door.

If you could change one thing for the future, whatwould it be?

I'd put a cap and gown on everybody. Even though I've saidit's one of the highlights of the future, it's the greatest needin this industry...to educate our people and make them bettersales people. I also think that we're going to see a growingtrend to the development of individual state associations withinthe industry. More and more people are realizing that there arevery few national issues that the industry will face, but thereare a ton of local and statewide issues. I look at the effortswithin the Texas, New York, Louisiana and Atlanta associations,and see some very exciting things going on. This industry, likeevery other industry, is just starting to understand that bybanding together you can lick your problems. If we take the"I don't need anybody else attitude," then we getdivided and conquered. Maybe it will be a while before someareas--like North Dakota and South Dakota--that have their ownassociations, but certainly there is a reason for people to gettogether in major metropolitan areas. I think it is theresponsibility of the leaders within each state to make it theirbusiness to create these associations so that if a problem doescome up they have a structure that can be used to work throughit. If I could create a state association in every state in theunion, I'd do it. The entire industry would benefit.

What's your best advice for newcomers to the industry?

Talk to people. Read everything you can get your hands on.Educate yourself. Get to seminars, get to meetings. You need toknow enough about the industry before you even think aboutpicking out a site. You also have to spend a little money at thefront end to get somebody knowledgeable to help advise you; it isthe best money you'll spend...even if that person tells you thetruth that you shouldn't build on a specific site. The otheradvice for newcomers is: Don't be misled by the outwardappearance of this industry. There's more to it than meets theeye. And there's more to it every year because of competition andlegislation. You can't do enough homework before getting into thebusiness. Finally, join your state association and join thenational association--the Self Storage Association.

From whom have you learned the most?

I've learned what unconditional love is from my wife, Jackie,and the simple joy of a smile and a kiss on the cheek from ourdaughters, Christie and Alyssa. I learned how to work hard frommy dad, and I know about devotion to family from my mom. In termsof this business, I've already mentioned Buzz Victor. I'velearned a lot from Bob Attea of Sovran. He taught me thediscipline of real-estate acquisition. Joe Niemcyk and MelHolsinger have taught me a great deal as I've watched them growtheir business. I consider Executive Self Storage one of thefinest managed companies in this business.

I've learned a lot over the years through my friendship withHardy Good. I've seen him re-engineer his company and fine tuneoperations to meet the needs of the industry. One of the peoplethat stands near the top of the list is Doug Sarini of ManhattanMini Storage/Edison Parking. He was the chairman of board of theNew York State Association while I served as the organization'spresident. Doug has a vision of where this industry could go anda strong commitment to the NYSSSA. He gave unselfishly as anorganizational leader, and that has always meant a lot to me.I've also learned a great deal from Ken Piken. Ken was generalcounsel for the association and someone that I could always counton.

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