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An Overview of Finance for Canada Self-Storage: Deals, Rates and More


By Jacqueline Blackwood

Last summer, President Obama and the U.S. Congress worked aggressively on ways to reduce the U.S. deficit, discussing further the agreement to raise the U.S. Department of Treasury’s borrowing authority in attempt to avoid a default of its debt.  Ben Bernanke, chairman of the U.S. Federal Reserve, even suggested the possibility of introducing another round of “quantitative easing” as an approach to stimulate the U.S economy and, in turn, the banks.

North of the border, the major banks in Canada, known as the Big Six (Bank of Montreal, Canadian Imperial Bank of Commerce, Bank of Nova Scotia, Royal Bank of Canada, Toronto-Dominion Bank, National Bank of Canada), continue to remain relatively stable, as they managed to do throughout the economic downturn. It may be surprising, then, that financing from the Big Six and other financial institutions is still hard to come by for self-storage.

New construction for developers is especially difficult to initiate, with financing up to 65 percent of cost, at best. Prior to the recession, self-storage developers were able to finance lease-up costs in addition to construction costs. Nowadays they struggle for either. It’s clear banks are far more conservative in terms of lending. 

Even if an owner is in a good financial position and granted funding from the banks, the length of time it takes to finance a deal has increased drastically. There are stringent requirements and prerequisites that must be met, including a variety of third-party reports, all on top of an already prudent financial institution. Ultimately, the costs to finance—aside from interest rate and bank fees—are on the rise, while being coupled with lower leverage only means more equity is required. 

Interestingly, it’s not the financing of the actual construction phase that has the banks hesitant; it’s the lease-up or bridge stage where they see the most risk. Despite the challenges noted above, there’s a rise in the development and construction of newer facilities, albeit nowhere near as high as before the financial crisis began.


In 2008, there was a sense of panic within the Canadian self-storage industry. Many experts cautioned that numerous facilities would come up financially short to the degree they would have no alternative but to sell. Fortunately, the industry was stable enough to endure the recession and those warnings did not materialize, at least not to the anticipated extent.

Canada has seen self-storage facilities undergo financial distress, but to the best of my knowledge, there has only been one default. This circumstance was a function of high debt, high construction costs and outrageous lease-up expectations (rate and speed). Fortunately for both the bank and the owner, all the financing was recovered, and a good portion of the equity was also recovered. 

Refinancing, in general, hasn’t been a huge problem for the industry, as most maturing loans are rolling over with their existing lender. There’s speculation that some of the loans set to rollover in 2012 and beyond will be more difficult to acquire, but at this time, it has remained a non-issue.

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