By Foy & Co. Investment Real Estate Services
In Canada, portable storage has become an increasingly popular storage option for consumers. While it’s certainly not replacing traditional self-storage facilities, it is a growing section of the industry, offering an additional short-term storage option.
Having worked with a few portable-storage companies on acquisitions and financing, we’re impressed with this increasingly popular business model. That said, there are still points to consider before a storage operator decides to jump on the bandwagon.
Before jumping into portable storage, facility operators need to be aware of the initial hurdles and uncertainties that come with the emergence of this new industry niche.
Traditional loans continue to be hard to come by unless you have a very strong track record, personal guarantees, or the leverage is below 50 percent. There doesn’t appear to be a set formula for obtaining capital, and each bank has its own criteria. Loan terms can be quite specific, and self-storage hasn’t been on the radar for most banks when trying to match investment opportunity with corporate goals. That said, there’s been a slight increase in the availability of capital from banks compared to last year.
The biggest concern for Canadian self-storage is the amount of loans coming due in the near future, and lack of available funding options. Refinancing will be a struggle as primary lenders look only at the best deals, leaving the rest to find more expensive or alternative financing solutions.
Portable-storage development projects that received financing before the economic downturn are continuing as planned. However, most projects appear to be focused on building additions to existing facilities rather than developing new ones.
Many development projects that failed to receive loans before the downturn have been shelved due to lack of financing. Finding capital has been a major stumbling block, and many groups have had to struggle under the burden of debt.