Goldman: Delinquencies are often a function of management. In Kansas and Missouri, we’re not seeing an increase in delinquencies across the board, only in certain situations where management does not stay on top of collections.
Hitler: I’ve spoken to several hundred self-storage owners this past quarter and been pleasantly surprised by their responses. Business is either good or very good, and the vast majority are seeing occupancies at or exceeding historic norms without corresponding increases in concessions. Only a small minority have seen their occupancy fall in the past six months. Delinquencies have ticked up for most owners, but only by a few percentage points.
Johnson: In the St. Louis area, we are seeing a small increase in delinquencies due to general economic conditions. Time will tell if this trend is more of a temporary effect or if the overall economic climate is changing.
3. In this very difficult market with many properties for sale, how do you help a facility achieve greater visibility and attract more buyers?
Bahrmasel: In addition to employing traditional marketing methods like newsletters, tradeshow participation and regular contact with buyers, the most important thing we can do in this market is make sure properties are priced correctly. Some sellers who set their prices based on old assumptions have seen their properties languish on the market. Others who are more in tune with current values or have reset pricing to reflect what is going on in the current market are receiving considerable attention, which may ultimately result in a transaction.
Goldman: Now is the time to explore new venues to get the word about self-storage to a newer profile of investors who are sick of the uncertainty of the stock market, retail centers, office buildings, etc. In addition to our traditional marketing, we’re expanding our programs to include alternatives such as Craig’s List and increasing our presence at state tradeshows.
Also, reaching out within the commercial real estate brokerage community is an effective way to increase interest in the self-storage asset class. In today’s market, non-storage brokers are more open to bringing their buyers to us, as the general velocity of investment real estate has slowed.
Hitler: There is currently a wide chasm between seller and buyer valuation expectations. Sellers still have 2007 values in their heads and have difficulty accepting that even though their business is generating the same revenue as 18 months ago, their properties’ value has fallen 10 percent or more because of macroeconomic conditions beyond their control.
Buyers, on the other hand, see what is happening in the residential market and believe these conditions must carry over to self-storage. To close this divide, sellers need to be more flexible, especially if the securing of bank financing continues to get more difficult for buyers. I foresee more deals using seller financing. Sellers also need to be prepared to throw in other terms that improve the value for buyers.
Johnson: Sales activity can be increased by targeting specific buyers, especially in small-town markets. In many cases, the right buyer for a property can be found in the same local area as they are the most familiar with that particular market. Local advertising in newspapers is a way to reach out to individuals who are not as familiar with the larger self-storage publications. Attendance at local and national tradeshows is another great way to increase the exposure of self-storage properties for sale to very targeted groups of potential investors.
Michael L. McCune is president of the Argus Self Storage Sales Network, a national network of real estate brokers who specialize in self-storage. Argus provides brokerage, consulting and marketing services to self-storage buyers and sellers and operates SelfStorage.com, a marketing medium and information resource for facility owners. For more information, call 800.55.STORE.