By Mike Iacoboni
Editor's Note: This month's Market Profile is out of the ordinary. Rather than detailing the self- storage climate of a specific U.S. market, this article tells the story of a couple who have tackled a "virgin," foreign territory, the challenges they have faced and their ongoing success.
How often have you said to yourself, "If I only knew then what I know now"? What would you do differently if you could? What pioneering steps or risks would you take, fortified with a clear vision of the future? Outcomes are determined by a lot more than knowledge, so success is never a sure thing. It requires desire, persistence, effort--and a fair amount of capital.
My wife, Jane, and I have taken the opportunity to be the very first people to introduce the concept of self-storage to Nicaragua. It takes a lot of educating and patience to bring a new service to a virgin market and convince potential customers that secure, weatherproof, accessible self-storage is preferable to the corner of the yard or a friend's field.
Nicaragua is located in the middle of Central America. It enjoys a semitropical climate and is a land of verdant beauty. There are hundreds of miles of empty beaches on its Pacific Coast. Nicaragua has an emerging economy similar to that of the United States in the 1950s (or 1850s in some cases), with an appetite for all things American and a growing means to afford it. Managua, its capital, is a short hop from Miami or Houston, making for an easy business commute. The Nicaraguan government is offering generous tax breaks for foreign investment, while the international community is discovering what a bargain travel and real estate are in that country. Consequently, warm-weather second homes and expatriate businesses are springing up everywhere.
It is a time of vigorous dynamic growth in Nicaragua's economy and infrastructure; and wherever you find dynamic transitions, you find a need for self-storage. Nicaragua has provided us the opportunity to apply what we know now in a land of then.
When we first posed our idea to others we were greeted with loud guffaws. "The Nicas don't have anything to store" was a common refrain. True enough, but as you would in the United States, we were targeting a specific market sector. Jane and I were comforted by an often-quoted phrase from Albert Einstein: "If at first an idea does not seem absurd then there is no hope for it." We also took heart when people would stop us on the street and ask us how soon before they could rent a unit. We knew we had to build a small development.
Obviously, you want to start any new concept/service business in a major population center. For Nicaragua, this would mean Managua, a big, not-very-pretty city. We considered quality-of-life factors as well as quantitative elements in our deliberations and settled on San Juan del Sur, a sleepy fishing community nestled in a cove on the Pacific. This town gets a major share of national vacationers (seasonal rental for water toys) and is now host to international cruise lines that began calling in January 2000. The little town with a population of 5,000 is gentrifying, with new hotels being added, and vacation and retirement homes springing up everywhere.
To our delight, we discovered a complete absence of zoning or building-code requirements or other outside forces to distract the project. We have found, though, that this freedom is a double-edged sword. To our dismay, we discovered a complete absence of borrowing opportunity--this being a cash economy. This raises the stakes of the game and means we cannot enjoy the benefits of leverage, the ninth wonder of the world (with compound interest being the eighth, according to Einstein).
For our entry project, we chose an existing 11,000-square-foot warehouse and set about transforming it into a world-class self-storage demonstration project. The primary language here is Spanish. We were faced with the challenge of locating an English-speaking contractor who can accomodate North American time tables, contracting practices and level of quality. I would do all the architectural and take-out renderings.
After several failed interviews, we were at an impasse. We could not find all the necessary qualities in one builder. Then a chance encounter brought us into contact with Nelson Estrada, owner of GENSA, a contracting firm in Managua. He earned an MBA from Harvard, is fluent in English, and understands quality building techniques and practices. As an added bonus, his wife, Martha, is a strong equal partner in the firm and lends valuable support.
As this project was unique in Nicaragua, we had to iron out a few wrinkles along the way; but we were able to handle them. We have a mix of units, including 17 12-by-25-by-20-foot units that are climate controlled with roll-up doors; 11 10-by-12-by-12-foot units with hinged doors; and two 20-by-25-foot office suites. The center driving aisle is 28 feet wide. There is some open storage space as well. The final numbers for the project came in at $3.73 per square foot for acquisition and $4.64 for build-out and completion.
A Market Challenge
More of a challenge than the construction was the marketing. We knew what we wanted to say; our challenge was to deliver our message to others in a language we did not yet speak. Communicating the benefits of an unknown service was a major task. It's like e-commerce, which five or 10 years ago was untested and untrusted. Today, it's an accepted fact of ordinary life. We are climbing that same hill now. After much consideration, we chose the name Sano y Salvo to represent our company, which, loosely translated, means "safe and sound." We think it has a nice ring to it, but we do get ribbing from our Spanish-literate friends for our poetic license.
Getting a placement in the local Yellow Pages presented another marketing challenge. The publishing company simply did not understand what our service provided. They had no fields in the computer to accomodate us and were somewhat inflexible about meeting our needs. After several meetings with ever higher levels of management and using pictures from Inside Self-Storage magazine as a teaching aid, we finally got our placement.
We officially began operations on Oct. 1 and are at 60 percent occupancy in our large units and 10 percent occupancy in our smaller units. Our most popular storage items are actually vehicles, as we have a large expatriate community that spends a few months here during the year.
We aggressively handed out leaflets in town during the holidays to educate our potential clients and create demand. The Yellow Pages directory with our ad is not yet in general circulation, but the telephone plays a minimal role in our business. In this country of 4 million people, there are only 40,000 phones, including cell phones and pagers! Word of mouth and direct referral has proved to be the major driver of our business.
So far, Jane and I have been energized and challenged by our little project. History will be the judge of how well we applied our know-how to the land of "then." For the moment, though, we have chosen to mark our entry ramp with our handprints and the letters WWTT: What Were They Thinking?
Mike Iacoboni and his wife, Jane, are the proud owners of Sano y Salvo Self Storage in San Juan del Sur, Nicaragua.