For the most part, the above items are cosmetic in nature. They can sometimes be corrected with only minor effort and cost. My caveat is if there are too many deferred maintenance items, the costs can escalate rapidly, and the store may be one to simply avoid purchasing.
You’ll want to meet the key operating personnel of the store. This is normally the manager and possibly a weekend-relief person. Your goal is to retain good employees. Make sure you understand how important the managers are to the success of the existing operation.
Are they involved in the local community? Have they been managers for a number of years with good occupancy and revenue numbers or less than stellar? If the managers are great, you need to make sure they continue in your employment during the change in ownership. The loss of a key employee through a change in ownership can result in a dramatic decrease in occupancy and revenue.
You need to understand the location metrics of a self-storage store, since it’s virtually impossible to change. There are several items that really can’t be corrected, such as if the store was built on a flood plain, has environmental issues, lacks expansion possibilities, has limited visibility from the major thoroughfare, has poor layout and design, or deteriorating demographics and excessive competition in the area. These are deal-killers, the types of items money cannot fix.
Finally, note if the potential acquisition target is in your existing market area. You need to have some additional pricing leeway in consolidating a competitor in your market.
Go or No Go
No-go items are the things you cannot fix, for example, a store that’s built in a flood-prone area, or the layout is such that it would be inconsistent with achieving a healthy future return. Pass on these potential acquisition targets.
Go items with corrections are those you can fix with some effort and expertise. These may include minor store renovations or cleaning, improving the marketing, and making a manager change. Of course, give some additional leeway if you’re acquiring a competitor in your existing market.
Time for a final gut check. You’ll probably never see the “perfect” store available for purchase, so try to be the best informed buyer you can be, and exclude the stores that have obvious no-go items or too much deferred maintenance. If the acquisition target is in the “gray area,” it’s probably worth skipping as well. Only when you feel confident in your analysis that you have minimized the downside risk of acquisition should you move forward with your purchase decision. The best of luck to you!
Jeffrey Turnbull is president of Kodiak Mini Storage LLC. He has been involved in the self-storage business as a developer, owner and operator for more than 17 years. He currently owns two stores in the Charlotte, N.C., market. He’s a licensed attorney in North Carolina, a licensed real estate broker in North and South Carolina, and a past president of the North Carolina Self Storage Association. He’s also a frequent contributor to Inside Self-Storage and a speaker on various self-storage industry issues. He can be reached at firstname.lastname@example.org .