Several of the self-storage real estate investment trusts (REITs) provide third-party management services to independent operators nationwide. If you're a facility owner, you may be wondering what it's like to be managed by a REIT and how it can benefit you. If you're serious about signing on with a REIT, no doubt your managers have questions as well.
In a recent series of interviews, Inside Self-Storage asked REIT executives to provide insight to their management services. Our participants discuss the advantages, the challenges, the transition process, what to expect and more. Our panel includes:
- Clint Halverson, vice president, corporate communication and investor relations, Extra Space Storage Inc.
- Dale Payne, client relations/sales manager for Uncle Bob’s Management, Sovran Self Storage Inc.
- Carol Shipley, vice president of third-party management, CubeSmart
For an independent self-storage operator, what are the advantages of hiring a REIT to handle third-party management?
Halverson: There are many advantages to hiring Extra Space as a third-party manager, with the top two being our people and our platform. Our senior management team has worked together for more than a decade, so we’re well-versed on the company and industry trends. We also hire exceptional team members at the store level.
Our technology platform has been a consistent key driver of our success. Smaller mom-and-pop stores simply can’t compete with the depth of what we can provide in terms of systems and marketing power. We spend more than $25,000 per day on keyword search terms alone and have 42 folks working for our organization on Internet strategy. We bid on 12 million search terms per day to find the right customer at the right time and at the right price. We know what our potential customers are searching for and can deliver the top results.
Payne: The biggest benefit is the ability to take advantage of the size, scale and reputation of a national brand. REITs have the resources to execute effective and far-reaching Web and mobile marketing programs, as well as the infrastructure to support doing business through Web and mobile—all emerging trends that can be cost-prohibitive for a smaller operator. Further, REITs offer in-house call centers with highly trained sales reps and extended hours, thereby capturing more rental inquires; sophisticated revenue-management systems to increase revenue; solid accounting and audit functions; and regional oversight for day-to-day operations.
Uncle Bob’s also includes a centralized human resources department and a comprehensive manager-training program that combines one-on-one training with a Web-based learning-management system that delivers more than 500 standard and proprietary training modules.
Shipley: The advantages of professional third-party management are numerous. Independent operators are becoming increasingly aware of the reality that marketing dynamics in self-storage have evolved, and it now takes scale and sophistication to compete. The primary advantage of REIT third-party management platforms is they provide that crucial scale and sophistication.
What are the potential disadvantages?
Halverson: Extra Space has very established processes and reporting. Some owners who are first-generation entrepreneurs are used to running and being involved in every decision for their property on a daily basis. When you engage a larger operator, that level involvement is simply not possible.
Payne: For the hands-on owner/operator, it can be a difficult and an emotional reality check to step away from daily operations. It is also essential to the success of the newly formed agreement. The new management company needs the flexibility to implement the programs deemed necessary to achieve the owner’s goals. This is one reason it is so important for an owner to have a strong level of trust in the management company’s ability.
Shipley: It requires buy-in. The extent to which this is a disadvantage really depends on the preferences and objectives of the facility owner. Some owners are unwilling to relinquish control. If the owner is unwilling to cede significant control to the third-party manager, the relationship may be challenging and results may be impacted.
Another disadvantage is that third-party management, in many cases, prevents the development of a unique identity and brand equity. Certain providers such as CubeSmart do, however, give owners the option of maintaining their unique identity while still benefiting from the full scale and sophistication of the REIT platform.